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Update on US Oil production

Update on US Oil production thumbnail

A post by Ovi at peakoilbarrel

All of the oil (C + C) production data for the US state charts comes from the EIAʼs Petroleum Supply monthly PSM. After the production charts, an analysis of three EIA monthly reports that project future production is provided. The charts below are updated to September 2020 for the 10 largest US oil producing states.

Septemberʼs US production increased by 286 kb/d to 10,860 kb/d from Augustʼs output of 10,574 kb/d. Septemberʼs increase was largely the result of the GOM coming back on line after being shut due to hurricanes. This can be seen in the September On-Shore L48 production graph which was essentially flat at 8,901 kb/d, actually down by 22 kb/d.

During July, August and September there were approximately 180 rigs operating in the On-Shore L48. It will be interesting to see how the addition of 60 rigs in October and November affects production in the On-Shore L48 states. (See next chart)

The US continued to add rigs in November. The rig count increased by 20 in November to 241 by the week of November 25. The rig count reached a low of 172 rigs in the week of August 14. Since then 69 rigs were put back into operation as the price of WTI increased from $36 at the end of October to $44 at the beginning of December.

Listed above are the 10 states with production previously greater than 100 kb/d. Over the last few months, both Utah and Louisiana fell below 100 kb/d but are retained for consistency. These 10 accounted for 8,968 kb/d (85.1%) of US production out of a total production of 10,860 kb/d in September 2020. North Dakota had the largest MoM increase.

On an MoM basis September, US production increased by 286 kb/d while on a YOY basis production was down by 1,619 kb/d. If GOM were a state, its production of 1,510 kb/d would rank second after Texas.

Texas production decreased by 60 kb/d in September to 4,628 kb/d. From the rig chart above, Texas rigs increased from a low of 90 in July to 130 in the week of November 25. During September, the number of oil rigs increased to 99. The increase in operational rigs has not been sufficient to overcome the decline in Texas LTO fields. Let’s see if the additional rigs increase production in October.

September’s output was 1,215 kb/d day, an increase of 61 kb/d over August. September’s output increase was almost 1/2 of the August increment. Since the production low in May, ND added 351 kb/d by September. During September, 9 rigs were operational.

Septemberʼs New Mexico production increased by 19 kb/d to 1,024 kb/d. New Mexico had 43 rigs operating during September. By the week of November 25, 57 rigs were operating.

From a low of 359 kb/d in May, Oklahoma’s production rebounded in July to 476 kb/d. However August production dropped by 19 kb/d and September’s by 12 kb/d to 445 kb/d. During September 11 rigs were operating in Oklahoma. In January 2020, 50 oil rigs were in operation.

Coloradoʼs September’s output decreased by 27 kb/d to 418 kb/d. Coloradoʼs oil rig count dropped from 4 in September to 3 in October and then back to 4 in late November. In January, 18 were in operation. Colorado has entered a steady decline phase after reaching its peak in November 2019.

Californiaʼs slow output decline continued in September. September production dropped by 2 kb/d to 378 kb/d.

Alaskaʼs September output continued flat at 444 kb/d. Typically September shows an increase but not always. However this source reports October production to be 466 kb/d and this source indicates that November output will rise to close to 480 kb/d.

The October and November increases may be associated with the bringing on line of a new field which was announced in early 2020.

Wyomingʼs production in September increased by 4 kb/d to 247 kb/d. During the month of September, Wyoming had 1 operational oil rig.

Louisianaʼs output dropped by 1 kb/d in September to 84 kb/d and appears to be in a steady slow decline. In January 2020, on average, 22 oil rigs were operating. During the week of October 30, 13 oil rigs were in operation, a decline of 1 since September.

Utahʼs production bottomed in May 2020 at 71 kb/d and rebounded to 90 kb/d in August. September production dropped by 3 kb/d to 87 kb/d. Three oil rigs began operating in Utah in October. No Rigs were in operation from weeks 18 to 41. Week 41 is early October,

Production from the GOM fell to a new low of 1,196 kb/d in August , a drop of 453 kb/d due to hurricanes. September saw a rebound to 1,510 kb/d, an increase of 314 kb/d. If the GOM were a state, its production would rank second behind Texas.

UPDATING EIA’S THREE OIL GROWTH PROJECTIONS

1) DRILLING PRODUCTIVITY REPORT

The Drilling Productivity Report (DPR) uses recent data on the total number of drilling rigs in operation along with estimates of drilling productivity and estimated changes in production from existing oil wells to provide estimated changes in oil production for the five principal tight oil regions. The charts are updated to December 2020.

Above is the total oil production from the 7 basins that the DPR tracks. Note that the DPR production includes both LTO oil and oil from conventional wells/fields.

According to the November DPR report, LTO oil and conventional oil output bottomed in May 2020 at 6,797 kb/d. The projected output for December 2020 is 7,513 kb/d, down 139 kb/d from November.

The contribution from three of the DPR/LTO basins is shown in the charts below.

Permian output in December is projected to be 4,299 kb/d, down by 37 kb/d from November. Since the May low, the Permian has added 380 kb/d but output has rolled over since the current high in September. The source for the roll over is given in the next chart. Note that production began to drop in October even as oil rigs were added as shown in the rig chart above.

This chart shows the production of conventional oil in the Permian. It was obtained by taking the difference between the DPR and LTO reports. Since conventional production increased in June, it has been in a steady decline ever since. In October, production was down 25 kb/d from September and down by 169 kb/d from March. While in Section 2, Permian LTO output is shown to be increasing, the decline in conventional production results in an overall DPR decline starting in September 2020.

After bottoming in May, Eagle Fordʼs output reached a local peak in July and then began to roll over. In December, EF output is projected to drop by 27 kb/d to 983 kb/d.

After the Bakkenʼs two big output drops in April and May, output began to bounce back in June. In December output is projected to be 1,133 kb/d a decrease of 33 kb/d from November.

2) LIGHT TIGHT OIL (LTO) REPORT

The LTO database provides information on LTO production from seven tight oil basins and a few smaller ones. The November report projects the tight oil production to October 2020.

Octoberʼs LTO output is expected to decrease by 70 kb/d to 7,144 kb/d from September’s 7,214 kb/d. Note that the November report has increased the September estimate from the October report by 67 kb/d, raising the September estimate from 7,147 kb/d to 7,214 kb/d.

Permian LTO output in October is projected to be 3,894 kb/d, an increase of 19 kb/d from September.

The Bakkenʼs October output is expected to be 1,205 kb/d, an increase of 51 kb/d from September.

The Eagle Ford basin is expected to produce 943 kb/d in October, a decrease of 26 kb/d from September. The number of operational drilling rigs in the EF has increased from 9 in September to 19 in November. In January 68 were operational. How many operational rigs are required to keep output from falling in the EF basin?

Conventional oil is expected to increase in the On-shore L48 to 1,865 kb/d in October. An increase of 61 kb/d from September.

3) Have LTO Wells Peaked?

Another version the above question is: “Have the sweet spots in the Permian and EF been fully exploited?

The above graphic was created using charts from Shale Profile. The individual charts compare the peak production rates for the second month for wells in the Permian and EF for the years 2020 and 2019. In both cases the peak rates for 2020 are lower than 2019. The Permian and EF wells are down by 5% and 7% respectively. Actually, the average EF well peaked slightly higher at 673 kb/d in 2017 rather than the 664 kb/d shown. Shale Profile also shows that with current drilling rates holding steady, production going forward will continue to drop to a lower equilibrium level in these two basins.

4) SHORT TERM ENERGY OUTLOOK (STEO)

The STEO provides projections for the next 13 – 24 months for US C + C and NGPLs production. The November 2020 report presents EIAʼs updated oil output and price projections out to December 2021.

The November STEO report output projection for the L48 is very similar to the one that appeared in the October report, not shown. From November 2020 to February 2021, output is projected to be approximately 140 kb/d higher than was expected in the September report. Note that the November STEO is not projecting any meaningful output increase after November 2020.

The November STEO is projecting a WTI price below $40/bbl from November to February. However on October 30 December WTI futures contract settled at $35.79/bbl. Since then it has climbed to $44/bbl in Early December..

World Oil Production

World oil production reached its lowest level in June at 70,423 kb/d. August added 1,036 kb/d to reach 72,606 kb/d, which is 2,183 kb/d more than June. Of the 2,183 kb/d, 1,575kb/d came from OPEC and 607 kb/d from Non-OPEC.

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