Why the EIA Expects the US Shale Production Drop to Accelerate
Permian Basin shale oil production
On February 8, 2016, the EIA (U.S. Energy Information Administration) released its latest Drilling Productivity Report. The EIA estimates that the Permian Basin’s crude oil production amounted to ~2.0 MMbpd (million barrels per day) in January 2016. This was 0.6% higher than December 2015’s production and a whopping 20% higher than production in January 2015. In January 2016, the Permian Basin’s shale crude oil production rose month-over-month for the eighth time in a row.
Permian Basin shale oil production rose from 862,890 bpd (barrels per day) in January 2008 to 2.0 MMbpd in December 2015. That’s a rise of 136% in eight years.
Rigs in the Permian Basin
In January 2016, the number of rigs working in the Permian Basin was 199, down from 212 in December 2015. There were 490 active rigs in the Permian Basin in January 2015. The number of active rigs in the United States has fallen significantly over the past year.
Monthly additions from the average rig
The EIA calculates that the average Permian Basin rig added production of 419 bpd in January 2016, a 73% rise since January 2015. In the past eight years, the additional production per rig has risen by ~5.7x.
What’s this mean for oilfield services companies?
The rising Permian Basin productivity over the past year had a positive impact on drill equipment makers such as Schlumberger (SLB), National Oilwell Varco (NOV), Cameron International (CAM), and Halliburton (HAL). However, Permian Basin crude oil production and drilling productivity can eventually fall as marginalized wells start replacing the declining wells to maintain production. Cameron International forms 1.1% of the Guggenheim S&P 500 Pure Growth ETF (RPG).
The Bakken Shale is one of the most prolific crude oil shales in the United States. In the next part of this series, we’ll see why.
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