This report analyzes oil production, rig count, and well performance in the US, especially in the Permian Basin

Analysis

United States

Vice President, Forecasting & Analytics

Dr. Sang Hyun (Sean) Lee, PhD

Analyst, Forecasting & Analytics

Zihao Chen

Oil production in the US has been increasing while the rig count has been decreasing since November of 2022. Current production has reached the pre-Covid level.
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Analysis of US Oil Production

<div class="mce-toc">
<h2>Table of Contents</h2>
<ul>
<li><a href="#mcetoc_1h96j10q246">Analysis of US Oil Production </a></li>
<li><a href="#mcetoc_1h96j10q247">Outlook </a></li>
</ul>
</div>

<h2 id="mcetoc_1h96j10q246">Analysis of US Oil Production </h2>

Oil production in the US has been increasing while the rig count has been decreasing since November of 2022. Current production has reached the pre-Covid level.
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&nbsp;There are several factors that are resulting in this apparent contradiction. 
<ul>
<li> Production from the Permian has been increasing significantly and contributing a greater share of overall US production in comparison with the pre-COVID period. </li>
</ul>
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<ul>
<li> This shift has occurred even though the Permian Basin still represents around 60% of the operating horizontal oil rigs, similar to the pre-Covid level</li>
</ul>
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<ul>
<li> In the Permian Basin, the monthly completion count has reached pre-Covid levels since June 2022. This high completion count has occurred despite the low rig count because the inventory of DUC wells has declined from 3,514 wells in July 2020 to 856 wells in July 2023.</li>
</ul>
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<ul>
<li> Another factors is that drilling activity in the Permian Basin is being achieved with increasing efficiency. In July 2023, 337 rigs drilled 460 wells, compared to March 2020, when 405 rigs drilled 462 wells, which translates into an efficiency improvement of 19%. </li>
</ul>
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<ul>
<li>
The average lateral length of a horizontal Permian well has increased by around 15% to 9,848 feet from 8,566 feet in 2019. Additionally, the average proppant loading of these wells has risen by approximately 7% to 2,190 lbs/ft.
</li>
</ul>
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<ul>
<li> The performance of Permian wells has increased by around 15% compared to their performance in 2019.&nbsp; In March 2023, the Permian produced 179 million barrels of oil with 104.4k producing wells, while in March 2020, it produced 153 million barrels of oil with 105.2k wells.</li>
</ul>
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<ul>
<li> The result is that the Permian has an increased number of wells and increased production from the Permian in comparison with pre-COVID </li>
</ul>
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<h2 id="mcetoc_1h96j10q247">Outlook </h2>
The current dynamics driving the production increases are not sustainable, mainly because the inventory of drilled but uncompleted (DUC) wells is being depleted. At the current pace, the inventory of DUCs will be exhausted in approximately two years. As such, drilling activity will have to start ramping up in the near future, or US production will plateau.

Oil production in the US has been increasing while the rig count has been decreasing since November of 2022. Current production has reached the pre-Covid level.
<ul>
<li> In the Permian Basin, the monthly completion count has reached pre-Covid levels since June 2022. This high completion count has occurred despite the low rig count because the inventory of DUC wells has declined from 3,514 wells in July 2020 to 856 wells in July 2023. </li>
<li> Another factor&nbsp;is that drilling activity in the Permian Basin is being achieved with increasing efficiency. In July 2023, 337 rigs drilled 460 wells, compared to March 2020, when 405 rigs drilled 462 wells, which translates into an efficiency improvement of 19%. </li>
</ul>
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