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The U.S. Shale Industry Hit A Brick Wall In 2019

The U.S. Shale Industry Hit A Brick Wall In 2019

The Great U.S. Shale Industry Machine is finally running out of steam.  What looked very promising for the shale industry in 2018 seems incredibly bleak this year.  And, if the situation doesn’t turn around quickly for the shale industry, 2019 might turn out to be the year that production ultimately peaks in the United States.

There several factors that have negatively impacted the U.S. Shale Industry in 2019; the compounded annual decline rate, the massive debt–inability for shale companies to raise money, and the stunning amount of new wells necessary to increase overall production.  While shale experts are knowledgeable of the typical 60-70% first-year decline rate of shale wells, not much is mentioned about the “compounded annual decline rate.”

The chart above shows that as overall Shale oil production increases, the decline curve becomes steeper. U.S. shale oil production in the top four fields hasn’t increased all that much because the nearly 6,000 wells brought online so far this year had to offset the stunning 2 million barrel per day decline from the production in 2018.

The next series of charts, from Shaleprofile.com, will show why the U.S. Shale Industry has hit a brick wall.  The first chart shows the number of wells added each year in the top four shale fields:

The four top U.S. shale fields are the Bakken, Niobrara, Permian, and Eagle Ford.  In 2017, the shale industry added 7,636 wells, 9,953 wells in 2018, and 5,924 wells by August 2019.  According to Shaleprofile.com, there are still 82 wells not accounted for yet in 2019.  So, the total for the first eight months of 2019 is 6,006.

If we look at the Well Profiles part of the chart, we can clearly see that when the increase in the number of wells in 2015 and 2016 started to taper off, overall production plateaued and declined. 

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