Oil production from key shale formations in North Dakota and Texas increased marginally in August versus July, according to a recent report by Bentek Energy.
Oil production from the Eagle Ford shale basin in Texas remained relatively steady in August, jumping 23,000 barrels per day (bpd), or less than 1 percent, from July, the latest analysis showed. Oil production in the Eagle Ford basin has been growing between 1 to 3 percent each month since January, when production showed the first (and so far only) sign of decline when it decreased 16,000 bpd month-on-month. Meanwhile, crude oil production in the North Dakota section of the Bakken shale formation of the Williston Basin remained little changed, decreasing 6,000 bpd, or less than 1 percent in August from July.
The average oil production from the South Texas, Eagle Ford basin last month was 1.7 million bpd, according to Bentek Energy, an analytics and forecasting unit of Platts, a leading global provider of energy, petrochemicals, metals and agriculture information. On a year-over-year basis, that is an increase of slightly less than 240,000 incremental bpd, or about 17 percent higher than August 2014, according to Sami Yahya, Bentek energy analyst. The average crude oil production from the North Dakota section of the Bakken in August was 1.2 million bpd, or about 66,000 bpd from year ago levels.
“While the discussion of the positive impact of efficiency gains on production levels is important, it is worth highlighting the completion deferment,” said Yahya in a Sept. 17 statement. “While the U.S. is able to drill more wells now with fewer rigs, some producers are opting to defer completing their wells until better economic conditions are present. In other words, production could begin to decline even if rig activity and number of drilled wells remain steady. This is a crucial risk to current production numbers.”
While in the short term completion deferment can hurt production levels, it can be viewed as an increasingly used cost-saving method in the present environment, Yahya said.
“In the past, producers tended to drill and complete wells one at a time, whereas now, more producers are drilling wells in large clusters and only after all wells are drilled do they complete them at a batch,” Yahya said. “By not having to bring completion rigs back and forth one at a time, they save money.”
Bentek estimates approximately 60 percent of the drilling and completion cost lies with the completion process, which alone is a significant capital investment. Delaying completion can help producers hone their budgets until higher rates of return come about.
Bentek analysis shows that from August 2014 to August 2015, total U.S. crude oil production increased by about 300,000 bpd.
The extra production is reflected in lower prices, noted Luciano Battistini, Platts managing editor of Americas crude.
“August was a month of bearish market sentiment,” Battistini said. “The outright market values of the two shale crudes hit their lowest points of the year. However, now that U.S. crude production has slowed, market sentiment has improved slightly, with expectations of some price recovery.”
The Platts Eagle Ford Marker, a daily price assessment launched in October 2012 and reflecting the value of oil out of the Eagle Ford Shale formation in South Texas, has decreased 4 percent between January and August, with an average price of $55.67 per barrel for the first eight months of 2015. But it is down 53 percent from last year’s levels. The marker has ranged between $41.42 and $66.23 per barrel since the beginning of 2015, with the lowest value reached in August.
The price of oil out of the Bakken formation at Williston, North Dakota, was down 14 percent between January and August, with an average price of $47.40 per barrel for the first eight months of 2015, according to the Platts Bakken assessment. However, the Platts Bakken price is down 55 percent when compared to last year’s corresponding month. The wellhead assessment has ranged between $33.35 and $59.32 per barrel since the beginning of January, with the lowest value reached in August.