The government said Wednesday the number of drilled but uncompleted wells reached 5,957 in July 2021, the fewest in any month since November 2017 while the number in the Anadarko Basin which includes Oklahoma is at its lowest level since 2018.
The Energy Information Administration released its Drilling Productivity Report and stated the drop in DUCs “reflects an increase in well completions while new well drilling activity remains low.”
Of the five major U.S. oil producing regions, DUCs in the Eagle Ford, Bakken, and Niobrara have declined to the lowest level on record since December 2013, and DUCs in the Permian and Anadarko regions have declined to the lowest level since June 2018.
It also stated the combination of more wells being completed but fewer wells being drilled is contributing to the return of oil production in the Permian basin. But it is also driving the current DUC inventories down. The EIA suggested it could limit oil production growth in the U.S. in the coming months.
Although the significant reduction in DUCs follows an increasing rate of well completions in the Permian region, both the number of wells drilled and completed in all other regions remain at historically low levels.
The EIA stated: “Given that fewer new wells have been drilled than have been completed in recent months, DUC inventories may continue to decline. Based on our latest DPR, 393 wells were completed in the Permian region in July 2021. At that monthly completion rate, the Permian region has less than six months of DUCs remaining, which is approaching the lowest number of months of DUC inventory since September 2018. The low months of inventory in the Permian region may affect completion activity (slowing it down) or new well drilling activity (speeding it up).”
Indicators of new well drilling in the United States remain subdued. As of August 20, the Baker Hughes active oil rig count was 405 rigs. Although representing an annual increase of 222 rigs, this rig count is historically low compared with other periods when front-month crude oil futures prices were near similar levels or at even lower prices (Figure 4). Increases to rig counts typically lag four to six months behind a price increase. If drilling activity doesn’t increase, then well completions and production may be limited as the inventory of DUCs continues to fall.