U.S. Second Largest Oil Field Production Falls As Decline Rates Rise

by Steve St. Angelo, SRSrocco:

While Americans continue to believe that the U.S. will become energy independent, the county’s second largest shale oil field is seeing a drop in production due to a rising decline rate.  The Eagle Ford Region in Texas experienced an increase in production as the oil price, and drilling activity increased since the beginning of 2016.

At its peak in March of 2015, the Eagle Ford was producing more than 1.7 million barrels of oil per day (mbd) but fell 30% to 1.2 mbd in November 2016 as the oil price declined.  However, as the oil price recovered and drilling rig activity increased, oil production at the Eagle Ford rose to 1.4 mbd currently.

Unfortunately, oil production at the Eagle Ford is forecasted to decline in October.  According to the EIA’s Drilling Productivity Report, the Eagle Ford will add 89,000 new barrels of oil per day (bd) in October but will lose 98,000 bd due to legacy declines:

Eagle-Ford-Production-Change-OCT-2017.png

The top graph in the chart above shows the monthly decline rate in the Eagle Ford Region.  As oil production increased in the field, so did the decline rate.  When the Eagle Ford peaked in oil production at the beginning of 2015, so did its legacy decline… a whopping 140,000 bd.  Furthermore, as drilling rig activity decreased, the decline rate started to fall, shown as the line moving higher.  Eagle Ford’s monthly decline dropped to 80,000 bd at the beginning of 2017.  However, as drilling rig activity increased once again, from 36 at the end of 2016 to 91 in July, the decline rate started to increase as well.

Even though the Eagle Ford will add 89,000 bd of new production in October, it will lose 98,000 bd, for a net loss of 9,000 bd:

Eagle-Ford-Production-OCT-2017.png

Now think about this for a minute.  The drilling rig activity in the Eagle Ford surged from 36 at the end of 2016 to 91 by June, but production only increased 200,000 bd.  Now, production is already falling as drilling rig activity moderately declines.  Also, most of the companies producing shale oil in the Eagle Ford didn’t make any money as production increased 200,000 bd.

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