Some most interesting conclusions about the Permian Basin oil production and drilling activity are included in the latest report from the U.S. Energy Information Administration. Of course, those conclusions involve Oklahoma energy companies that have a heavy presence in the west Texas and southeast New Mexico.
The report found Permian crude oil production will grow in 2025; there is more drilling activity there than the rest of the nation; and more drilled wells but uncompleted are being completed than new wells being drilled.
In the U.S. Energy Information Administration’s latest Short-Term Energy Outlook (STEO), it forecasts that crude oil production in the United tates will grow to an average of 13.7 million barrels per day (b/d) and marketed natural gas production will grow to an average of 114.3 billion cubic feet per day (Bcf/d) in 2025.
Most of the forecast growth in oil and natural gas production comes from the Permian region of western Texas and eastern New Mexico, where we expect productivity gains, new and expanded infrastructure, and high crude oil prices will support rising production.
In order to better capture drilling activity in several onshore U.S. regions, our STEO now makes use of multiple drilling productivity metrics. The number of active rigs is the first in a sequence of metrics that affects regional production; currently more rigs are active in the Permian region than in the rest of the Lower 48 states combined. We also capture and report the number of new wells that those rigs have drilled each month.
Drilled but uncompleted wells (DUCs) have been drilled but have not yet undergone well completion activities to start producing hydrocarbons. The well completion process involves casing, cementing, perforating, hydraulic fracturing, and other procedures required to produce crude oil or natural gas. Ultimately, when these wells are completed, they begin producing crude oil, natural gas, or both.
Producers make decisions on drilling and completion operations based on market conditions, prices, and infrastructure. A downward trend in the DUC count means producers are completing more wells than they are drilling.
Well productivity is contributing to Permian production gains
U.S. crude oil and natural gas production has been increasing despite a decline in the number of active rigs since late 2022. Since early 2023, the Permian region has had more active rigs than the rest of the Lower 48 states and has continued to complete hundreds of wells (or prepare them for production) each month.
In the Permian, increased rates of production from new completions are offsetting existing wells’ production declines and leading to higher crude oil and natural gas output. These productivity increases indicate significant efficiency gains and technological advancements in the drilling and completion process.
As of July 2024, newly completed wells in the Permian were producing an average of 433,000 b/d in their first full month. Natural gas production from new Permian wells in July 2024 averaged 780 million cubic feet per day. This new well production is more than offsetting the declines in production from existing wells.