Oil companies continue to draw down their inventory of unfinished wells, according to Houston Chronicle, “as they put off new drilling to satisfy investors who want to see financial discipline after the pandemic-driven oil bust.” U.S. Energy Information Administration said as of May 2021 in seven major tight oil and natural gas shale basins there were 6,521 DUC wells – up 47 percent from 4,425 DUC wells in 2013, but down 27 percent from 8,874 DUC wells in June 2020. Nearly 40 percent (2,616) of DUC wells are in Permian Basin.
EIA said, “Since the covid19 pandemic began, exploration and production companies have cut capital expenses, deployed fewer rigs, and reduced oil and natural gas production in response to lower demand and lower prices. DUCs help operators produce oil and natural gas at a lower cost… We estimate that most DUC wells are completed and begin producing hydrocarbons within one year after they are drilled.” EIA said companies maintain a backlog of DUC wells that can sustain production for several months “so they always have wells they can complete quickly… Operators need a constant supply of new wells that are ready to be completed to maintain steady production levels.” EIA said new oil and gas wells have decline rates of up to 60-to-70 percent after a year.
Texas-based petroleum economist Karr Ingham said when the DUC inventory is depleted, companies “will have to start drilling more wells to maintain production… The number of new wells could rebound in the second half of the year as the inventory of DUC wells continues to decline.”