Production from new wells makes up nearly half of all production, up from 22% in 2007

Production from new wells, or those drilled since the start of 2014, made up 48% of total U.S. crude oil production in 2015. New well production as a percentage of total U.S. production has more than doubled from 22% in 2007 with the increased use of hydraulically fractured horizontal wells, according to the EIA. These wells have extremely high initial production rates with steep decline curves, leading to the rapid increase in the percentage of total production made up from new wells.

Crude oil production from hydraulically fractured wells now makes up the majority of oil produced in the United States. As of 2015, 51% of crude oil produced in the U.S. came from wells targeting tight oil formations including the Eagle Ford and Permian Basin in Texas, and the Bakken and Three Forks formations of Montana and North Dakota.

Oil production from tight formations increased from 0.5 MMBOPD in 2009 to 4.6 MMBOPD in May 2015, at which point decreasing oil prices contributed to declines in oil production. As of December 2015, oil production from tight formations was 8% lower than the level in May. More than 80% of oil production from tight formations originates from the Eagle Ford, Bakken and Permian regions, according to the EIA.

Shale decline curve, lack of drilling starting to have effect

Production declines will likely continue as the wells drilled since the beginning of 2014 begin to see declining production and fewer new wells are brought online. In March of last year, the number of oil-directed wells in the U.S. totaled 922, according to information from Baker Hughes. Last week, rigs actively drilling for oil totaled just 387, 58% less than a year ago.

“U.S. production peaking last April, when 1,000 rigs were drilling confirms that only 476 rigs drilling last week are way too few to fuel demand growth,” commodities expert Mike Smolinski, president of Energy Directions, said in his Energy Market Assessment Report out today.


Source: Bloomberg, U.S. rig count March 2011-2016

“April 2015 began with 802 rigs drilling for oil and 222 drilling for natural gas.  However, 1,000 isn’t enough to keep production growing.  We credit production decline taking so long to great efficiency adding flow below ground, but not above ground.  With above ground caught up, only 476 rigs drilling last week indicate a notable production decline next,” Smolinski said in the report.

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