Rystad: ‘Live’ US DUC well inventory lowest since 2013
For months, US tight oil operators have been depleting their inventory of drilled but uncompleted wells (DUC), and due to a slower drilling response, the number of “live” DUCs in the country’s major oil regions slumped to 2,381 wells in June 2021, the lowest level since 2013, according to Rystad Energy analysis.
The total number of horizontal DUCs in the Permian, Eagle Ford, Bakken, Niobrara, and Anadarko regions combined fell to 4,510 wells by end June. That implies a reduction of 1,800 wells from the peak of 6,340 in June 2020 and an average depletion of 150 wells/month over the past 12 months. The last time the size of the inventory was at this level was second-half 2018.
However, the total includes so-called “dead” DUCs—wells that were drilled more than 24 months earlier and remain uncompleted. Empirical evidence shows that more than 95% of wells drilled are typically completed within the first 2 years. The probability of those more than 2 years old being completed now are low. Therefore, including “dead” DUCs to gauge future activity or forecast production is often more speculative.
“Looking at the number of remaining ‘live’ DUCs, a significant oil supply response from the US onshore industry to the $70-75/bbl WTI market is practically impossible before the first half of 2022. Any further increases in fracking, and subsequently well completions, will now require producers to first expand drilling by adding more rigs,” said Artem Abramov, head of shale research, Rystad Energy.
Live DUCs have declined across all major oil basins, with the Anadarko region the only exception. In the Permian basin, only about 1,550 horizontal live DUCs remain as of end June—a decline of 37% from the 2,470 wells in the same month last year. As rig activity in the Permian basin has remained more robust since the start of the COVID-19-induced downturn, the total live DUC inventory count has not returned to the 2013 level, as is the case for all other basins combined.
The Permian live DUC inventory level currently is comparable to the second and third quarters of 2019. The picture across other major oil basins is more dramatic. South Texas’ Eagle Ford and the Bakken only have 300 live DUCs each left. Such a level in these two liquids plays has not been recorded since 2010. The inventory of live DUCs is down to 310 in the Niobrara region—the lowest since 2013.
A breakdown of the total tight oil DUC inventory by spud vintage, or the year the wells were spudded, shows that 2019-2020 vintages had a significant weightage on fracturing activity as of June. While new wells are being drilled, the new inventory build-up in 2021 is insufficient to offset the depletion coming from pre-2021 vintages.
In previous months, Rystad highlighted vintages from fourth-quarter 2019 and the first 3 months of 2020 as key contributors of the unusually high DUC inventory build-up in the beginning of the COVID-19-induced downturn. By June 2021, 84% of those were completed. While still somewhat lower than the 14-month depletion rate of 92-93% recorded for fourth-quarter 2016 to first-quarter 2017 and fourth-quarter 2017 to first-quarter 2018 vintages, it is comparable to the 87% posted for the fourth-quarter 2018 to first-quarter 2019 vintage, Rystad said. Hence, this part of the DUC inventory anomaly has been largely eliminated by now, the report continued.
“While some degree of abnormality is still present, the industry is not that far off from a complete normalization of the DUC inventory level. The number of horizontal live DUCs per rig has already declined to 6.4 wells in the Permian and 9.2 in other major oil regions as of June 2021. Prior to the COVID-19 downturn, the level was at 3.9 for the Permian and 6.4 across other oil regions. Given the current activity and depletion trend, the industry will likely see a complete normalization by the end of September in the Permian, and by September-October across other oil regions,” Rystad noted.
