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.