Crude Oil ( ) Brent Crude ( ) Natural Gas ( ) S&P 500 ( ) PHLX Oil ( )

The EIA predicts overall U.S. production to continue growing despite declines in the Eagle Ford, Niobrara and Bakken plays.

The Energy Information Administration’s (EIA) most recent Drilling Productivity Report (DPR), which covers the months of March and April 2015, include the first projected declines in crude oil production in the Eagle Ford, Niobrara and Bakken since the DPR began publication in October 2013. Predicted production gains in other regions, particularly the Permian, offset the losses in the Eagle Ford, Niobrara and Bakken, leading the EIA to predict that overall crude production rose slightly in March to 5.6 MMBOPD. Total production in the DPR regions in April is expected to be virtually unchanged from its March level, according to the EIA report.EIA DPR April March 2015

With the continued bearish outlook for the oil market, producers have been laying down less efficient rigs in order to cut costs. The EIA notes that during the last price downturn in 2008-2009 that, despite falling rig counts, production did not fall. The Administration says, at that time, this trend was due to the higher levels of efficiency of the remaining rigs. The EIA was uncertain that the trend would be the same this cycle, saying, “Because the base level of rig performance is so much higher now than several years ago, it is not clear that productivity gains will offset rig count declines to the same degree as in 2008-2009.”

The most recent report on rig counts from Baker Hughes (ticker: BHI) showed a continued decline in the United States for the fourteenth straight week. The total number of active rigs in last week’s rig count was 1,125, down 6% from the week before and down 27% from the start of the year.

The Permian region, where as late as December 2013 half the operating rigs were vertical rigs, still appears to be experiencing significantly larger productivity improvements than other DPR regions. In general, average production from a vertical well is significantly smaller than that from a horizontal well. As more vertical rigs are brought offline, the ratio of vertical to horizontal rigs in the Permian, which has only fallen below 1:1 in recent months, according to the EIA, is coming closer to the vertical-to-horizontal rig ratio in the other DPR regions.

Vertical to Horizontal Well Ratios DPR

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. The company or companies covered in this note did not review the note prior to publication.


Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.