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

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