Kemp: US Oil Production Is Probably Peaking Right Now
It is unlikely a halving of the rig count can be completely offset by greater target selectivity and other efficiency improvements such as employing only the most powerful rigs, drilling longer laterals and reaching target depth faster.
Drilling data points to a strong probability that production from new wells will soon start to fall - if it is not falling already. Given the rapid declines in output from wells drilled in 2013 and 2014, total output from new and legacy wells should start to fall soon.
The most common question I am asked at the moment is: if the rig count has fallen by 50 percent, why is output still rising?
The simple answer: there is a delay of six months or more between changes in the number of new wells being drilled and reported changes in production.
It can take 20-30 days for a rig to drill a new well and then another 60 days or more for the well to be fractured and all the above-ground equipment put in place before the well flows its first oil.
Most major oil-producing states require well operators to submit a monthly report on the amount of oil and gas produced, but the first report is not usually due for up to two or three months after a new well has begun flowing.
Even then, the first report may not be representative of a full month's production because the well may have started flowing part way through the month in question.
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