I note how little oil production decline (<10%) is occurring since early 2015 in spite of the precipitous decline in rig count and new wells coming online.
Demonstrates the flat nature of production of all those wells drilled years ago.
This is really good news for the sustainability of unconventionals. Like an annuity.
The scare mongers would have you believe that the declines of all unconventionals is horrendous, but that only applies to the newer wells. Once those newer wells settle down, the long-life nature of production is apparent.
From IP to stabilization there is a 70-80% decline in BOPD production, generally, over roughly 2 years. Considering the Montana Bakken Wells (Especially Elm Coulee Field) were past the steep initial decline, and North Dakota wells completed prior to 2014 were, too, a large part of the production is from wells which have reached the more stable part of their production history. Even with no new drilling and or completions, the decline in production would plateau fairly high because of the smaller contribution of wells in their first two years of production.
Whenever I actually spoke with the landowners (mineral rights owners) I would tell them to bank their first few royalty checks, before they bought anything. and not to leverage for payments over 10% of the second one if they were counting on oil money to pay for it. But then, I also told the roughnecks to buy a solid beater to drive to the rig and save up for their dream pickup and pay cash for it.
Some listened, and thanked me when the slump started.
The wild cards in the mix are the DUC (Drilled but UnCompleted) wells, which could be brought on line when the cost and price curves cross into favorable territory. Having the takeaway capacity to handle that production will be part of the equation.
