Shale Drillers Pump More Oil From Each Well as Rigs Mean Less

Oil Declines Below 60USD A Barrel

Workers prepare drilling pipe on a deep sea crude oil platform in the waters off Veracruz, Mexico.

Photographer: Susana Gonzalez/Bloomberg
  • Companies are drilling wells faster and in better oil patches
  • New oil output is down 39%, compared with rigs dropping 59%

Shale producers in the U.S. have learned to do more with less.

Last year’s price crash forced drillers to cut budgets, reducing the number of rigs in U.S. oil fields by 59 percent from the peak. Crude production, though, has fallen only about 5 percent.

Part of the reason for that is a spurt of innovation driven by desperation. Rig productivity increased last month in all shale oil plays, the Energy Information Administration said in a report Monday, as companies drill more wells in less time.

Wells being drilled this month will be able to pump about 389,000 barrels a day of new production, down 39 percent from last November, a much shallower drop than the overall rig count, according to Austin, Texas-based Drilling Info Inc.

“The amount of producibility per rig is changing, and it’s changing relatively quickly,” Allen Gilmer, chief executive officer of Drilling Info, said by phone. “As the rig counts were dropping, they were high-grading the wells and drilling longer laterals, so they’re tagging better production.”

The increase in productivity is helping prolong a glut that’s trimmed prices by more than half.

Production in the Permian Basin is expected to rise by 23,000 barrels a day in October, to 2.02 million, according to the EIA. In North Dakota’s Bakken, output is forecast to decline about 21,000 barrels a day to 1.18 million, down just 6.4 percent from the peak in December. Eagle Ford production will likely fall 62,000 barrels a day to 1.42 million, down 17 percent from its peak in March.

While the price drop has been painful for companies, which have had to cut more than 170,000 jobs since the collapse began, it has also forced them to become more efficient, which should pay off when prices rebound, Gilmer said.

“When oil was $100, you didn’t have to be good, you just had to be there.”

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