[Industry Report] Revealing Horizontal Well Oil Production Across Major US Basins

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In this report, we will analyze the latest developments in the 4 largest US tight oil basins, which include the Permian, Williston, Eagle Ford, and the Denver-Julesburg (DJ).

Together, these 4 basins were producing over 8 million barrels of oil per day (b/d) in August 2023, while outside these basins less than 0.8 million b/d was produced in the Lower 48 states. In this report, we only count output from horizontal wells, which is important when comparing with the EIA.

1. Total production by basin

The following overview shows the total tight oil production history for each of these basins through August 2023:

Total tight oil production in the 4 major basins, through August 2023.

The 45 thousand horizontal wells in the Permian Basin produced over 5.3 million b/d (after upcoming revisions). Interestingly, the Williston and DJ Basin are also showing some positive growth again in recent months.

2. Drilling Activity

horizontal rig count through November 2023, by basin, and WTI (right hand side).

3. Well Productivity Trends

In this section, we'll examine how well productivity has changed since 2015. The following graph plots the average cumulative oil production in the first 6 months, by first production date for all horizontal oil wells that began production in these 4 basins:

Well productivity and completion trends in the 4 key US tight oil basins. Horizontal oil wells only.

In the top chart, you can find that average well productivity appears to have peaked in 2021 in US shale. The 7.3k horizontal wells that came online in 2021 produced, on average, 106.8 thousand barrels of oil in their first 6 months of production. The 3k horizontal wells that began produc- tion this year, and for which we already have 6 months of production data, only scored 97.7 thousand barrels on this metric. This represents an annual decline of 4.2%.

In the bottom two charts, you can see that this decline happened, despite increasing lateral lengths (from 9.2k feet in 2021 to 9.8k feet so far in 2023), while proppant intensity (proppants divided by lateral length) remained constant.

Obviously, there are strong regional differences. In the top-producing county, Lea in New Mexico, which was the only county that produced over a million b/d in August, the trend is even more concerning:

Well productivity in Lea County. Horizontal oil wells only.

In Lea County, well productivity based on the same metric has dropped by 16% in 2 years, despite a small increase in average lateral length. Devon and EOG are among the operators that are most impacted by this trend.

4. Supply Projection

How would the oil supply from these basins look if the rig count, rig efficiency, and well productivity remained the same? From our Supply Projection dashboard, we can see the following outlook based on such an unrealistic, but interesting base case:

Horizontal rig count (top) and historical and projected tight oil supply (bottom) in b/d.

If we assume a constant rig count, and no changes in rig efficiency and well productivity, we can see in the bottom chart that tight oil supply would continue to grow in the coming years to 9.5 million b/d by the end of this decade. This represents an increase of 1.3 million b/d.

But, suppose we extrapolate the trend we just noted in the previous 2 years and include an average annual decline of 4% in average well productivity?

horizontal rig count (top) and historical and projected tight oil supply (bottom) in b/d assuming an annual decline in well productivity of 4%.

In this scenario, we find that we would end this decade basically without any growth. This also reveals that the disturbing trend in declining well results can have a material impact on future production and is worth monitoring.

5. Top Tight Oil Producers

Finally, we'll share a ranking of the 12 largest tight oil operators within these 4 basins and their production history through August 2023:

Production history (b/d) of the top 12 tight oil operators in the 4 covered basins. Horizontal wells only.

The effect of the Chevron acquisition of PDC, which closed in August, is clearly visible. The planned combination of Exxon Mobil and Pioneer Resources would create a juggernaut of 900k b/d of unconventional production in these 4 key basins.

*All the graphs today come from Novi Insight Engine, which is an online analytics platform filled with interactive dashboards that allow you to explore the most recent shale oil & gas related data

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