{"id":11977,"date":"2015-09-08T06:55:13","date_gmt":"2015-09-08T11:55:13","guid":{"rendered":"http:\/\/olduvai.ca\/?p=11977"},"modified":"2015-09-08T06:55:13","modified_gmt":"2015-09-08T11:55:13","slug":"the-biggest-red-herring-in-u-s-shale","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=11977","title":{"rendered":"The Biggest Red Herring In U.S. Shale"},"content":{"rendered":"<h3><a href=\"http:\/\/oilprice.com\/Energy\/Crude-Oil\/The-Biggest-Red-Herring-In-US-Shale.html\" target=\"_blank\">The Biggest Red Herring In U.S. Shale<\/a><\/h3>\n<p>Rig productivity and drilling efficiency are red herrings.<\/p>\n<p>A red herring is something that takes attention away from a more important subject. Rig productivity and drilling efficiency distract from the truth that tight oil producers are losing money at low oil prices.<\/p>\n<p>Pad drilling allows many wells to be drilled from the same location by a single rig.<a href=\"http:\/\/www.eia.gov\/petroleum\/drilling\/pdf\/dpr_methodology.pdf\">Rig productivity<\/a>\u00a0reflects the increased volume of oil and gas thus produced by each of a decreasing number of rigs. It does not account for the number of producing wells that continues to increase in all tight oil plays.<\/p>\n<p>In other words, although the barrels produced per rig is increasing, the barrels per average producing well is decreasing (Figure 1).<\/p>\n<p><a class=\"lightbox\" href=\"https:\/\/oilprice.com\/images\/tinymce\/artsept1.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/cdn.oilprice.com\/images\/tinymce\/artsept1%20-%20copia.jpg\" alt=\"\" width=\"451\" height=\"308\" \/><\/a><\/p>\n<p><strong>Figure 1<\/strong>. Bakken oil production per rig vs. production per well.<\/p>\n<p>Source: EIA, Drilling Info and Labyrinth Consulting Services, Inc.<\/p>\n<p>(Click image to enlarge)<\/p>\n<p>Rig productivity is a potentially deceptive measurement because it does not consider\u00a0<em>cost<\/em>\u00a0and apparently it\u00a0<a href=\"http:\/\/www.eia.gov\/petroleum\/drilling\/pdf\/dpr-full.pdf\">always increases<\/a>. It gives a best of all possible worlds outcome that seems to defy the laws of physics. Drilling productivity gives the false impression that as the rig count approaches zero, production approaches infinity.<\/p>\n<p>Barrels per rig is interesting but the cost to produce a barrel of oil is what matters.<\/p>\n<p>Similarly, drilling efficiency measures the decrease in the number of days to drill a certain number of feet. This is also interesting but, unless we know how it affects the\u00a0<em>cost<\/em>\u00a0to produce a barrel of oil, it is not useful.<\/p>\n<p>The data contained in\u00a0<a href=\"http:\/\/www.sec.gov\/answers\/form10q.htm\">10-Q<\/a>\u00a0and\u00a0<a href=\"http:\/\/www.sec.gov\/answers\/form10k.htm\">10-K SEC<\/a>\u00a0forms provides a continuing view of a company\u2019s financial position during the year. This allows us to determine a company\u2019s cost per barrel and its components that rig productivity and drilling efficiency do not provide.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Biggest Red Herring In U.S. Shale Rig productivity and drilling efficiency are red herrings. A red herring is something that takes attention away from a more important subject. Rig productivity and drilling efficiency distract from the truth that tight oil producers are losing money at low oil prices. Pad drilling allows many wells to [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[3],"tags":[2434,5641,5332,8793,8792,846],"class_list":["post-11977","post","type-post","status-publish","format-standard","hentry","category-energy-2","tag-arthur-berman","tag-drilling-efficiency","tag-oilprice-com","tag-red-herring","tag-rig-productivity","tag-us-shale-oil"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/11977","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11977"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/11977\/revisions"}],"predecessor-version":[{"id":11978,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/11977\/revisions\/11978"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11977"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11977"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11977"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}