Permian drilling productivity will see first-ever decline, agency says

[IsailedawayfromFR]

Oil fields in West Texas are teeming with drilling rigs after crude prices shot up to $50 a barrel this year.

But the Energy Department believes a key metric of drilling productivity is about to turn south in the Permian Basin for the first time since its analysts began tracking it in late 2013.

Next month, the daily oil production of a new Permian well drilled by an average rig will decline by 10 barrels to 630 barrels, the Energy Department said in a recent report.

Of course, that doesn't even amount to a dent in the stunning productivity gains that oil companies have made in the Permian Basin over the past few years, but it's an ominous milestone for companies that have touted increasingly efficient and productive drilling as a way to offset the financial pain of low oil prices.

It also coincides with another trend: In recent months, oil companies have drilled a lot more wells than they've brought into production. The number of so-called drilled-but-uncompleted wells in the Permian Basin is expected to rise to 1,995 in June, up from 1,348 last August, when the Energy Department first began tracking these unstimulated wells.

Both of these recent developments, analysts said, are signs that drilling rigs are coming back to the Permian Basin so fast that they're far outpacing the speed at which contractors can ready fleets of hydraulic fracturing equipment needed to blast open dense rock formations and bring the wells into production
http://www.houstonchronicle.com/business/article/Permian-drilling-productivity-will-see-first-ever-11176574.php

There are likely other factors at play here rather than assuming the best is behind us, but it bears watching.

[Joe Wooten]

With the current surplus of drilling rigs, drilling is cheap, but completion activities are more expensive. Makes sense to drill the wells and stockpile them for completion when the price goes up a little more. With the mature infrastructure in the Permian Basin area, production can be quickly be brought to market to take advantage of temporary higher prices. They just need to keep a core of experienced fracking crews busy so as to absorb new workers with only a small decrease in efficiency.