Drilling for new oil and natural gas reserves in Texas and across the nation has declined 10% this year, but production continues at a record pace.
Historically, production declined when the Baker Hughes Rig Count, a key economic indicator, declined.
The U.S. rig count was 588 this week, which is a decline of 66 from last year at this time. Even the Permian Basin, the most active area in the nation, has declined 23 this year from 327 in August 2023 to 304 this week.
Today’s oil companies have become more efficient in the exploration and production game.
The industry now is drilling multiple wells from a single pad, which cuts the cost of moving the drilling rig each time to drill a new well. Companies also have developed the ability to complete several wells quickly also cutting cost. The new technology in drilling allows horizontal laterals as long as 3 miles allowing the drill bit to penetrate multiple pay zones.
Reuters reported this week that industry efficiency gains have led to some companies to increase their oil production targets. Chevron plans increased production in the Permian Basin about 15%. Diamondback, APA, Devon, Occidental Petroleum and Permian Resources also forecast higher than expected Permian shale producing in the coming months, according to Reuters.
“Devon pointed to a 12% drilling efficiency gain this year from drilling and said it had improved feet per day of well completion by 6% year to date, pushing its full-year oil output up about 3%. Permian Resources has raised its oil production target by 1.5% this year,” Reuters said.
Diamondback said they have reduced the time to drill a well by 10%.
Consolidation among U.S. shale producers had been expected to slow production growth this year, with companies preoccupied with combining staff and sorting through new properties, according to Reuters. “But the benefits of being able to extend wells into adjacent areas has boosted productivity,” Reuters said.
Oil production in the U.S. has averaged 13 million barrels per day this year, with almost half – 6.2 million barrels per day – coming from the Permian Basin of west Texas and eastern New Mexico.
New well production per rig rose to 1,400 barrels per day, the highest in two and half years, according to Reuters.
Alex Mills is the former President of the Texas Alliance of Energy Producers.
Alex Mills is the former President of the Texas Alliance of Energy Producers. The Alliance is the largest state oil and gas associations in the nation with more than 3,000 members in 305 cities and 28 states.
