Kemp: Factors That Will Drive US Oil Production In 2015
At the same time, breakeven prices for new wells will come down substantially to reflect cheaper drilling and pressure pumping costs.
In some instances, however, producers may postpone the completion of already drilled wells to defer the costs and hope for a recovery in prices.
Completion accounts for two-thirds of the total cost of some of the very long horizontal wells now being developed. And one third of the well's total production may occur in the first 12 months. So there are sharp financial incentives to slow completion where possible.
There is a substantial backlog of oil wells that were drilled in 2014 waiting for the arrival of pressure pumping crews and other completion services. U.S. production could continue rising for several more months as these wells are finished and put into production.
But there are also anecdotal reports from oilfields that some completions are being postponed to save costs and wait for a more favourable price environment. If widespread, slower completions could cause production to peak earlier than expected.
Data Availability Bias
While production forecasts are about much more than just rig counts, rig counts are one of the few pieces of data readily available in near real-time. There is no comprehensive and timely information on drilling speed, well depth and horizontal length, initial production rates, and decline rates on the stock of existing wells.
There is some information on the number of new wells started ("spudded") each month but that is only marginally more helpful than a rig count because production depends on where the wells are located and how many horizontal stages are fractured, among other factors.
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