Production of both crude oil and natural gas in seven major U.S. shale plays is expected to increase in October, according to the latest Drilling Productivity Report from U.S. Energy Information Administration. Oil output will rise 66,000 b/d from September to October to 8.135 million b/d, and natural gas volumes will increase 219 million cfd to 87.339 billion cfd. The largest increase in oil will occur in Permian Basin, which is expected to grow 53,000 b/d to 4.826 million b/d in October. Permian is only basin expected to see annual increase from October 2020 with volumes up 503,150 b/d or 12 percent.
Natural gas volumes are expected to increase by 82 million cfd to 13.497 billion cfd in Haynesville, by 74 million cfd to 34.857 billion cfd in Appalachia, and by 63 million cfd to 18.763 billion cfd in Permian.
EIA also reported another decline in DUC wells (drilled but uncompleted) to 5,713 in August from 5,961 in July (lowest since November 2017). Permian declined from 2,249 DUC wells in July to 2,119 DUC wells in August. Reuters said U.S. energy producers “have cut so deeply into a once-large reserve of oil wells waiting to be turned on (that) they soon may have to resume drilling to keep production from sagging… This would mean an increase in spending which could unsettle investors who have benefited from shale companies’ recent prioritization of shareholder returns over ramping up production.” For example, Diamondback, Pioneer Natural Resources and Devon have redirected rising cash returns to dividend growth, variable distributions, buybacks and further debt reduction.
Nick O’Grady of Northern Oil and Gas told Reuters, “Spending in 2022 will have to be higher just to sustain volumes enjoyed in 2021, and I think in general Wall Street is aware of that.”