Analytics firm finds Permian basin statistics misleading

Oil and gas companies under-reported hydraulic fracturing activity for producing light, tight oil by more than 20% in the Permian basin during 2018, estimates Kayrros, a data analytics company serving energy markets.

Oil and gas companies under-reported hydraulic fracturing activity for producing light, tight oil by more than 20% in the Permian basin during 2018, estimates Kayrros, a data analytics company serving energy markets.

Using optical and synthetic aperture radar imagery tracking coupled with proprietary algorithms to identify rigs and fracturing crews, Kayrros found that more than 1,100 Permian wells were completed but not reported through state commissions or FracFocus, a public repository for information on fracturing chemicals.

Kayrros counted 6,394 completed wells for 2018, representing a 21% increase on the FracFocus estimate of 5,272 wells as of June 20.

The backlog of drilled but uncompleted (DUC) wells is considerably smaller than believed, Kayrros said. In any given month, Kayrros evaluates the Permian DUC inventory at just about 1,000 wells.

“The prevalent view that shale operators sit on a large backlog of DUCs that could be quickly brought to production in the event of an oil crisis even without further drilling is thus deeply misleading. There is just no such inventory,” Kayrros said.

The findings also indicated that the average Permian well is both less productive and more costly than public data reflects.

Andrew Gould, Kayrros advisory board chairman, said, “Misperceptions about shale oil in general, and the Permian in particular, have consequences, hence the importance of these measurements that show Permian production per well has been substantially overestimated. By the same token, average production costs per well are understated. With far more wells contributing to Permian and US oil production than accounted for, current shale oil production is substantially more water- and sand-intensive than is commonly believed.”

The findings also have substantial implications for assumed efficiency of Permian basin operators’ performance, Kayrros said. The analysis said oil production is accurately measured in monthly US statistics, but it took many more wells to account for that production in 2018 than was reported.

Assuming a cost of $5 million per horizontal completion, 2018 operator expenditure was underestimated by as much as $4.1 billion. This also means the sand and water intensity of Permian tight oil production in 2018 was 23% greater than previously recorded. Sand demand was underestimated by 9.2 billion lb and water by 12.5 billion gal.

Contact Paula Dittrick at pdittrick@endeavorb2b.com.

More in Unconventional Resources