{"id":7704,"date":"2015-04-30T05:54:15","date_gmt":"2015-04-30T10:54:15","guid":{"rendered":"http:\/\/olduvai.ca\/?p=7704"},"modified":"2015-04-30T05:54:15","modified_gmt":"2015-04-30T10:54:15","slug":"the-u-s-production-decline-has-begun","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=7704","title":{"rendered":"The U.S. Production Decline Has Begun"},"content":{"rendered":"

The U.S. Production Decline Has Begun<\/a><\/h3>\n

It is not because of decreased rig count. It is because cash flow at current oil prices is too low to complete most wells being drilled.<\/p>\n

The implications are profound. Production will decline by several hundred thousand of barrels per day before the effect of reduced\u00a0rig count is fully seen. Unless oil prices rebound above $75 or $85 per barrel, the rig count\u00a0won\u2019t matter because there will\u00a0not be enough money\u00a0to complete more wells than are being completed today.<\/p>\n

Tight oil production in the Eagle Ford, Bakken and Permian basin plays declined approximately 111,000 barrels of oil per day in\u00a0January<\/a>.\u00a0These\u00a0declines are part of a systematic decrease in the number of new producing wells added since oil prices fell below $90 per barrel\u00a0in October 2014\u00a0(Figure 1).<\/p>\n

\"Chart_ALL<\/a>
\n<\/a>Figure 1. Eagle Ford, Bakken and Permian basin new producing wells by month and WTI oil price. Source: Drilling Info and Labyrinth Consulting Services, Inc.
\n(Click image to enlarge)<\/p>\n

Deferred completions (drilled uncompleted wells)\u00a0are not discretionary for most companies. Producers entered into long-term rig contracts assuming at least $90 oil prices. Lower prices\u00a0result in\u00a0substantially reduced cash flows. Capital is only available to fulfill contractual drilling commitments, basic\u00a0costs of doing business,\u00a0and to\u00a0complete\u00a0the best wells that come closest to breaking even at present oil prices.<\/p>\n

Much of the\u00a0new capital<\/a>\u00a0from junk bonds and share offerings is being used to pay overhead and interest expense, and to pay down debt to avoid triggering\u00a0loan covenant thresholds.Hedges<\/a>\u00a0help soften the blow of low oil prices for some companies but not enough to carry on business as usual when it comes to well completions.<\/span><\/p>\n

 <\/p>\n

…click on the above link to read the rest of the article…<\/p>\n","protected":false},"excerpt":{"rendered":"

The U.S. Production Decline Has Begun It is not because of decreased rig count. It is because cash flow at current oil prices is too low to complete most wells being drilled. The implications are profound. Production will decline by several hundred thousand of barrels per day before the effect of reduced\u00a0rig count is fully […]<\/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":[1775,595,2115,596,723,798,1474,3450],"class_list":["post-7704","post","type-post","status-publish","format-standard","hentry","category-energy-2","tag-oil-price-collapse","tag-oil-production","tag-oil-production-decline","tag-oil-supply","tag-shale-oil","tag-tight-oil","tag-us-oil-production","tag-us-oil-rig-count"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/7704","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=7704"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/7704\/revisions"}],"predecessor-version":[{"id":7705,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/7704\/revisions\/7705"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7704"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7704"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7704"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}