US shale companies produce more crude using fewer rigs

Permian Resources

13/08/2024 11:00

* 
      Shale producers' Q2 results show unexpected oil volume
gains
    

        * 
      Chevron, Devon, Diamondback, Apache boost FY output
forecast
    

        * 
      Drilling, completion efficiencies behind latest output
gains
    

  
    By Arathy Somasekhar
       HOUSTON, Aug 13 (Reuters) - 
    Greater operating efficiencies in the top U.S. shale patch
are squeezing out more oil without higher spending, according to
the latest output numbers, which will boost global oil market
supplies as 
    OPEC also plans to unwind
     its output cuts later in the year. 
  
    Producers are extending their wells to as much as three
miles, squeezing more wells onto a single drilling pad and
fracking several wells at once, boosting production, according
to industry experts and company executives on recent earnings
calls. 
    Taken together, these efficiency gains have led several big
producers to raise their full-year shale oil production targets.
Chevron  CVX.N  lifted its full-year Permian output target to an
about 15% gain, up from an earlier forecast of a 10% gain. 
    Diamondback  FANG.O , APA Corp  APA.O , Devon Energy  DVN.N 
and Permian Resources  PR.N , also forecast higher than expected
Permian shale production in coming months. Occidental Petroleum
 OXY.N  raised its outlook for the basin for 2024 by 1,000
barrels per day (bpd) excluding its acquisition of
Permian-focused CrownRock. 
    Devon pointed to a 12% drilling efficiency gain this year
from drilling and said it had improved feet per day of well
completion by 6% year to date, pushing its full-year oil output
up about 3%. Permian Resources has raised its oil production
target by 1.5% this year.    
    "Ultimately, we do see a market that will end up
oversupplied in the fourth quarter," said Walt Chancellor, an
energy strategist at banking and financial firm Macquarie Group.
    Macquarie estimates U.S. production will grow about 500,000
barrels per day (bpd) by the end of this year from the end of
last, exceeding U.S. government estimates calling for an about
300,000 bpd increase.
        "For OPEC, what this means is, we see them ultimately
not able to execute the current plan to bring production back
over the course of 12 months," Chancellor said. 
  
    
    
    NO POST-MERGER SLOW DOWN
    Consolidation among U.S. shale producers had been expected
to slow production growth this year with companies preoccupied
with combining staff and sorting through new properties. But the
benefits of being able to extend wells into adjacent areas has
boosted productivity. 
    "Efficiency minded public operators are increasingly
drilling longer laterals and squeezing more wells per pad," said
Ryan Hill, an analyst at energy data firm Enverus. 
    Diamondback, which agreed this year to acquire Endeavor
Energy Resources, said last week it was modeling that one rig
would drill at least 26 wells per year, up from a previous
expectation for 24 wells, adding it was drilling wells about 10%
faster than at the beginning of the year.
    Diamondback will be stingy with any divestitures in the
Permian as producing wells are "kind of worth their weight in
gold right now," said Kaes Van't Hof, Diamondback Energy's Chief
Financial Officer.     
    Chevron said it was one of the first to deploy
triple-fracking technology, which fracks three wells in quick
succession, reducing costs by more than 10% and shortening
completion times by 25%. That has helped boost the number of
production days, Chevron said.
    Total production from the Permian rose to 6.2 million
barrels per day in June, the second highest level on record,
according to the U.S. government data. New well production per
rig rose to 1,400 barrels per day, the highest in two and half
years. 
    Historically, U.S. oil production has topped estimates every
year since 2009, except for 2020 when COVID-19 pandemic crushed
demand and output, a review of U.S. data showed.   
    Falling rig counts have kept production from growing even
faster, and this eventually will slow the rate of increase. The
number of horizontal oil rigs working in the Permian fell by 20
to 295 in the latest week, according to data from Enverus. It
has fallen by 100 in the last five years.

 (Reporting by Arathy Somasekhar in Houston, additional
reporting by Mrinalika Roy in Bengaluru; Editing by David
Gregorio)
 ((arathy.s@thomsonreuters.com; +1 832 610 7346; Twitter:
@ArathySom;))