The slowdown in US hydraulic fracturing activity brought on by the COVID-19 pandemic-driven downturn has caused an inventory increase of about 750 drilled but uncompleted (DUC) wells the last 3 months, a Rystad Energy analysis of major liquid basins finds.
The backlog, which will likely increase in June, is equivalent to about 2 years of fracturing at the current pace.
“When it comes to the regional trends for the inventory of drilled wells awaiting frac services, we see a particularly strong build-up in the Permian Basin where almost 500 wells were added over the past three months. All other major liquids basins combined saw a build-up of about 270 wells in the same period,” said Rystad Head of Shale Research Artem Abramov.
“Usually there is a typical DUC build-up during winter months and a gradual drawdown during the spring and summer months. Contrary to the norm, in the last 3 months this metric jumped to 15 to 25 months of frac activity. However, in the second half of 2020 we might see a modest rebound in fracking without extra drilling.”
Drilled wells awaiting frac services have exceeded 5,700 assets at the end of May, the highest level since at least December 2017. At the end of 2019, DUC levels were just above 5,300 assets, while in February, which is an interim low, the number fell to just below 5,000.
The build-up since then is primarily driven by the wells that were drilled recently and are currently less than 6 months old (i.e. total depth was reached less than 6 months ago, but frac operations have not yet been started). This part of the inventory has increased from 1,651 wells at the end of 2019 to 2,970 wells now.
“In our view, this is currently the most representative part of the DUC inventory, which suggests that many recent wells are left uncompleted and will probably be carried all the way into 2021, so the industry is well positioned to boost or protect production while staying within relatively low capex levels,” Abramov said.