US shale production forecasts by basin?

US shale production forecasts by basin

This model sets out our US shale production forecasts by basin. It covers the Permian, Bakken and Eagle Ford, as a function of the rig count, drilling productivity, completion rates, well productivity and type curves. Thus, we derive production and financial expectations.

Production. At the start of 2022, we hoped the big three US shale basins would surpass 10.0 Mbpd of liquids production by Sep-22. The latest estimate is 9.2Mbpd. A 0.8Mbpd disappointment.

Activity is the main reason. At the start of 2022, we hoped the oil rig count in these three basins would end October at 520 units, up 3.5x from the troughs of 2020. We only have about 460.

Well productivity cannot be faulted. We thought the average shale well would be IP-ing at 0.81 kbpd. The average has come in at 0.90kbpd. All three basins beat our forecasts. Bakken most so.

DUC drawdowns cannot continue forever. We anticipated 1.03 wells might get completed for every 1 well drilled in 2022. The YTD ratio is 1.11x. At 2,200, DUC count is now at its lowest since 2013.

Most strikingly, we now see 2025 shale production at 15Mbpd, 10Mbpd below the high potential seen in 2018-19, due to the whipsawing effects of COVID, and hesitancy over long-term investment.

This might support expectations for a “weird recession” in 2022-24, where economic activity is weak, but traditionally cyclical commodity prices de-couple, to incentivize needed investment?

Our longer-term numbers hinge on the productivity gains described in our thematic shale research. Shale productivity trebled from 2012-2018. We think it can rise another 45% by 2025, unlocking 15Mbpd of liquid shale production. However productivity could disappoint mildly in 2022 as the industry ramps activity levels back post-COVID.

We have also modeled the Marcellus shale gas play, using the same framework, in a further tab of the data-file. Amazingly, there is potential to underpin a 100-200MTpa US LNG expansion here, with 20-50 additional rigs.

Please download the data-file to stress-test our US shale production forecasts by basin.

US CO2 and Methane Intensity by Basin

CO2 and methane intensities are tabulated for 300 distinct company positions across 9 distinct basins in this data-file. Using the  data, we can aggregate the total CO2 in (kg/boe) and methane leakage rates (as a percent of natural gas production) across the US’s different basins.

Covered basins include the Permian, Bakken, Eagle Ford, Marcellus/Utica, Alaska, GoM, Powder River, San Juan, Anadarko basin and DJ basin (chart above).

It is possible to rank the best companies in each basin, using the granular data, to identify industry leaders and laggards (chart below).

The cutting edge of shale technology?

The database evaluates 950 technical papers that have been presented at shale industry conferences from 2018-2020.  We have summarised each paper, categorized it by topic, by author, by basin, ‘how digital’ and ‘how economically impactful’ it is.

The aim is to provide an overview of shale R&D, including the cutting edge to improve future resource productivity. We estimate 2020 was the most productivity-enhancing set of technical papers of any year in the database.

Recent areas of innovation include completion design, fracturing fluids, EORand machine learning. We also break down the technical papers, company-by-company, to see which operators and service firms have an edge (chart below).

Shale EOR: the economics

This model assesses the economics of a shale-EOR huff’n’puff project. NPVs and IRRs can be stress-tested as a function of oil prices, gas prices, production-profiles, EUR uplifts and capex costs. Our input assumptions are derived from technical papers. We think that economics are increasingly exciting, as the technology is de-risked. As more gas is stranded in key shale basins, base case IRRs rise from c15% well-level IRRs to c20%.

Shale EOR: Container Class

Is Shale-EOR the next wave of unconventional upside? The topic jumped into the ‘Top 10’ most researched shale themes last year. Stranded in-basin gas will improve the economics. Production per well can rise by 1.5-2x. The theme could add 2.5Mbpd to YE25 output.

Do “digital” completions lift Permian IRRs?

EOG Sensor Plugs

We have modelled the economic uplift of extra digital instrumentation on a typical Permian well. If the data can uplift production by 2.5%, then c$0.4M of instrumentation costs would “pay back” (i.e., break even). If the data can uplift production by 10%, it would add +$1M of NPV and +5% IRR per well. These numbers are all shown at $50/bbl, but you can flex the inputs in our model.

U.S. Shale: Winner Takes All?

machine learning on permian seismic

Shale is a ‘tech’ industry. And the technology is improving at a remarkable pace. But Permian technology is improving faster than anywhere else. These are our conclusions after reviewing 300 technical papers from 2018. We address whether the Permian will therefore dominate future supply growth.

Copyright: Thunder Said Energy, 2022.