The Field Guide to North American DUCs
http://info.drillinginfo.com/field-guide-north-american-ducs/June 30, 2016 by Tanya Andrien
DUC well: At Drillinginfo, we begin our analysis with the literal definition: a well that has been drilled and has not yet been completed.[1] As of June 23, we had approximately 6,100 DUC wells in the 14 states where we track DUC wells, excluding new wells drilled in the month of June, as shown in Figure 1.
The chart shows the DUC well count based on the month when the well was drilled, and the high number of American DUCs in recent months indicate normal inventory in the process of being completed.
While the total DUC count is useful to track activity levels and forecast potential production, examining DUCS by vintage refines the DUC count into relevant subsets. Let’s use the Eagle Ford as an example, where we have 586 total DUCs as of June 23, as shown in Figure 2.
Similar to Figure 1, this chart shows higher level of DUC wells in more recent months, reflecting what we’ll refer to as work-in-process inventory (WIP). This is the portion of DUC wells in the normal lag time where the drilling has finished but completion activity hasn’t yet begun, or where a completion might have been finished but the associated filings have not yet been published nor has production been reported. This “time lag” varies by state based on different regulatory requirements, but simply scanning the chart indicates a step-change in DUCs from December 2015 to present. If we make a general assumption that wells drilled in the last six months are part of WIP inventory, we have approximately 248 wells in the Eagle Ford that we would expect to move from drilled to completed status on a normal schedule, as illustrated in Figure 3.
The chart shows the number of wells in the month they were drilled and the county where they are located. Not surprisingly, the most active counties for recent drilling are Karnes (green) and Dewitt (dark pink) in the core of the play.
Deferred completions: Many times when people ask about the DUC count, they really want to know the number of “deferred completions”, where drilling finished more than six months ago, and we still have no evidence of any completion or production activity. This may occur because a company is waiting for pipeline infrastructure or capacity, or because of an intentional delay waiting for better oil or gas prices. When I compute deferred completions, I typically begin counting DUCs from approximately October 2014,[2] where there was an increase in DUCs coinciding with a significant decline in oil price, up to the WIP inventory period. Continuing with our example, we have 296 deferred completions in the Eagle Ford during October 2014 through November 2015 as shown in Figure 4.
When and if these will come online will depend primarily on oil prices, and we can map them to see locations relative to the core, estimate future production based on offset wells, and perform a single well economics to determine when completing these may be economic.
What about DUC wells drilled prior to October 2014? This may be included in deferred completions, but I often refer to these as “dead DUCs.” If wells were not completed when oil was $90-$100, there is a good chance these will never be completed. We have 42 in the Eagle Ford during the period March 2014 through September 2014, as shown in Figure 5.
Classifying the 586 total Eagle Ford DUCs into work-in-process (248 wells), deferred completions (296 wells) and dead DUCs (42 wells) isolates relevant portions of the DUC inventory to enable comparative analyses and start to evaluate changes in these counts over time. For example, two weeks ago, there were 315 deferred completion DUCs, so operators have completed 19 of those wells.
[1] Our approach utilizes rig tracking to identify wells drilled, and then queries permit types, completion records filed at the state agencies, Frac Focus records, and well status filings to identify DUCs. We have a whitepaper available upon request that further details the methodology.
[2] These wells were finished drilling in October, before prices fell, but the product would not be brought online until November or later, at the lower oil price.
