By Arathy Somasekhar
HOUSTON (Reuters) – Greater operating efficiencies in the U.S. upper shale region will squeeze out more oil without higher spending, the latest production figures show, boosting supply in the global oil market as OPEC also plans is to reverse its production cuts later this year.
Producers are expanding their wells as far as three miles, squeezing more wells onto a single rig and fracking multiple wells at once, boosting production, industry experts and company executives said on recent earnings calls.
Taken together, these efficiency gains have led several major producers to increase their full-year shale oil production targets. Chevron (NYSE:) raised its full-year Permian production target to a gain of about 15%, compared to a previous forecast of a 10% gain.
Diamondback (NASDAQ:), APA Corp, Devon Energy (NYSE:) and Permian Resources also predict higher-than-expected Permian shale production in the coming months. Occidental Petroleum (NYSE:) raised its 2024 basin outlook by 1,000 barrels per day (bpd), excluding the acquisition of Permian-focused CrownRock.
Devon pointed to a 12% gain in drilling efficiency this year from drilling and said the number of meters per day well completions has improved by 6% so far, bringing full year oil production up about 3% increased. Permian Resources has increased its oil production target by 1.5% this year.
“Ultimately, we see a market that will be oversupplied in the fourth quarter,” said Walt Chancellor, energy strategist at banking and finance firm Macquarie Group (OTC:).
Macquarie estimates that U.S. production will grow by about 500,000 barrels per day (bpd) by the end of this year from the end of last year, exceeding U.S. government estimates that call for an increase of about 300,000 bpd .
“For OPEC, this means that they will ultimately not be able to implement the current plan to reduce production over the course of 12 months,” Chancellor said.
NO DELAY AFTER THE MERGER
Consolidation among U.S. shale producers was expected to slow output growth this year as companies focused on pooling workforces and picking new properties. But the benefits of being able to expand wells into adjacent areas have increased productivity.
“Efficiency-oriented public operators are increasingly drilling longer laterals and pressing more wells per pad,” said Ryan Hill, analyst at energy data firm Enverus.
Diamondback, which this year agreed to acquire Endeavor Energy Resources, said last week it was modeling that one rig would drill at least 26 wells per year, up from its previous expectation for 24 wells. the beginning of the year.
Diamondback will be stingy with any divestitures in the Permian because producing wells are “worth their weight in gold at this point,” said Kaes Van’t Hof, Diamondback Energy’s chief financial officer.
Chevron said it was among the first to adopt triple-fracking technology, which fracks three wells in rapid succession, cutting costs by more than 10% and cutting lead times by 25%. That has helped increase the number of production days, Chevron said.
Total Permian production rose to 6.2 million barrels per day in June, the second-highest level on record, according to U.S. government data. Production of new wells per drilling rig rose to 1,400 barrels per day, the highest in two and a half years.
Historically, U.S. oil production has exceeded estimates every year since 2009 except for 2020, when the COVID-19 pandemic crushed demand and output, a review of U.S. data showed.
Declining rig numbers have caused production to grow even faster, and this will ultimately slow the pace of increase. According to Enverus data, the number of horizontal rigs operating in the Permian fell by 20 in the past week to 295. Over the past five years, the number has dropped by 100.
