James Williams sees signs of slowing production in US, viz.:
Energy Economist: Oil Production Tipping Point - March 13, 2015
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Tipping Point
This monthly update of our short-term production forecast is based upon the EIA's Drilling Productivity Report for the major shale plays and our model for the rest of U.S. production. It indicates that the U.S. oil production will peak in April. The model shows Bakken and Eagle Ford production peaking in March and the Permian Basin in June. We suspect our model and the EIA's model are both forecasting on the high side and it is entirely possible that peak production in the lower 48 could come as early as this month.
Here's why. The model is driven by rig count with several built-in assumptions. The most important are (1) the lag between the time a rig appears in the rig count and the well is completed and connected to the gathering system; (2) the ratio between rigs running and wells completed; (3) the decline rate of wells currently producing; and (4) the production of the well in its first full month online.
There is already evidence that the length of time between drilling and completion is increasing as many companies honor their contracts with the drillers for rigs to drill the wells but because of low revenue producers are choosing to delay the completion which is more expensive than drilling.
Bakken
Yesterday North Dakota released its January data for production. Output was down 37,000 barrels per day from December to 1.190 million b/d. The number of well completions dropped from 183 in December to 47 in January.
The number of wells awaiting completion increased from 750 at the end of December to 825 at the end of January. Had the inventory of wells awaiting completion stayed flat there would have been about 125 wells completed instead of fewer than 50.
The EIA model showed January production increasing over 30,000 b/d. Difference in the model and actual data are common and normally we would not say a trend is in place on the basis on one month's production data, but the supporting evidence is overwhelming. The Bakken has already peaked and in the absence of a price increase it should continue down for the remainder of the year.
The model, which is predicting high, has February rig count well below the breakeven point for maintaining Bakken production. The reality is worse since many completions are being delayed. The breakeven chart below shows rig count (red) through February which averaged 123 rigs. Last week there were only 108 active rigs in the region. The Bakken needs 30 more rigs than that to maintain production without delays in completions. Some of the wells already drilled may not be completed until next year.
Since June higher production has dampened the impact of lower prices, but with rigs below the level necessary to maintain production the full impact of the 52% decline in price will just add to the financial problems in the region. Our revenue index is based upon the model estimates for production which we now believe is too high. Current estimates are that March revenue is down 43% since June.
Eagle Ford
The story is similar in the Eagle Ford. February rigs averaged 192 which is below the 208 breakeven point. While we do not have as much current data as we have from North Dakota there is clear evidence that producers are drilling wells to fulfill contract requirements. However, many are delaying completion either to preserve capital or until prices are higher. See EOG: Delaying completions is “right business decision.”
Last week the Eagle Ford rig count was 170 and we could see more cuts when the data comes out today. That is solidly below the breakeven point and we should see production decline in the next month if not in March.
Permian Basin
The Permian Basin rig count remains above the breakeven point currently estimated at 286. Last week it was 327 but if it continues to see declines like last week's 22 rig drop it will be in negative territory by the end of the month which indicates that production should peak in May or June.
 If the Permian follows the pattern of delayed completions, peak production could come as early as April.
Summary
Nationwide we have seen a 54% drop in oil prices since last June. Partially mitigated by higher production oil revenue in the shale plays is down 43% in the same period.
With less money from operations and funding from investors and bankers drying up drilling activity will continue to decline. The number of rigs should continue to decline and with a lower percentage of the new wells being completed oil production could peak this month or next. The would make the graph below from our model look optimistic.
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NYMEX Prices for March 12, 2015
| NYMEX Light Sweet Crude | -1.12
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$47.05
| | ICE Brent | -0.46
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$57.08
| | RBOB Gasoline NY Harbor | -0.0169
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$1.8095
| | Heating Oil NY Harbor | -0.0413
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$1.7791
| | NYMEX Natural Gas | -0.090
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$2.734
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| News
The weekly data was released as we were completing this report. At 1,125 rig count is down 806 (41.7%) from its recent high of 1,931 for the week of September 12, 2014. Detail rig count by area and basin is at Detail by State and Play. We will update rig count graphs and tables about 3:00 PM CST.
For additional revenue information go to Shale Play Revenue. Oil and gas production by play is in the U.S. Drilling Productivity Report.
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| | Detailed oil and gas production by play is in the U.S. Drilling Productivity Report. | Oil Production (1,000 barrels / day) Lower 48
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| Apr-2015 | Mar-2015 | Change | % Change | | Bakken | 1,320 | 1,328 | (8) | -0.6% | | Eagle Ford | 1,723 | 1,733 | (10) | -0.6% | | Haynesville | 57 | 57 | 0 | 0.1% | | Marcellus | 57 | 56 | 0 | 0.2% | | Niobrara | 413 | 419 | (5) | -1.3% | | Permian | 1,982 | 1,960 | 21 | 1.1% | Utica
| 62 | 59 | 3 | 4.8% | | Shale Plays | 5,613 | 5,612 | 0 | 0.0% | | Other | 3,422 | 3,414 | 8 | 0.2% | | Total | 9,034 | 9,026 | 8 | 0.1% |
| Natural Gas Production (Bcf / day) Lower 48
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| Apr-2015 | Mar-2015 | Change | % Change | | Bakken | 1.55 | 1.56 | -0.01 | -0.5% | | Eagle Ford | 7.53 | 7.52 | 0.01 | 0.2% | | Haynesville | 7.13 | 7.06 | 0.08 | 1.1% | | Marcellus | 16.79 | 16.71 | 0.07 | 0.4% | | Niobrara | 4.75 | 4.77 | -0.01 | -0.3% | | Permian | 6.43 | 6.40 | 0.03 | 0.4% | | Utica | 1.97 | 1.92 | 0.05 | 2.6% | | Shale Plays | 46.15 | 45.93 | 0.22 | 0.5% | | Other | 33.40 | 33.45 | -0.06 | -0.2% | | Total | 79.55 | 79.39 | 0.16 | 0.2% |
| Oil Production (1,000 barrels / day) Lower 48
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| Apr-2015 | Apr-2014 | Change | % Change | | Bakken | 1,320 | 1,033 | 287 | 27.8% | | Eagle Ford | 1,723 | 1,391 | 332 | 23.9% | | Haynesville | 57 | 56 | 1 | 2.3% | | Marcellus | 57 | 47 | 10 | 20.5% | | Niobrara | 413 | 346 | 68 | 19.6% | | Permian | 1,982 | 1,564 | 417 | 26.7% | | Utica | 62 | 25 | 37 | 148.9% | | Shale Plays | 5,613 | 4,461 | 1,152 | 25.8% | | Other | 3,422 | 3,526 | (105) | -3.0% | | Total | 9,034 | 7,987 | 1,047 | 13.1% |
| Natural Gas Production (Bcf / day)
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| Apr-2015 | Apr-2014 | Change | % Change | | Bakken | 1.55 | 1.15 | 0.40 | 34.3% | | Eagle Ford | 7.53 | 6.22 | 1.31 | 21.1% | | Haynesville | 7.13 | 6.65 | 0.49 | 7.3% | | Marcellus | 16.79 | 13.87 | 2.91 | 21.0% | | Niobrara | 4.75 | 4.51 | 0.24 | 5.3% | | Permian | 6.43 | 5.47 | 0.96 | 17.6% | | Utica | 1.97 | 0.89 | 1.08 | 121.6% | | Shale Plays | 46.15 | 38.76 | 7.39 | 19.1% | | Other | 33.40 | 33.08 | 0.31 | 1.0% | | Total | 79.55 | 71.85 | 7.70 | 10.7% |
| | For additional revenue information go to Shale Play Revenue. |
Shale Play Revenue Index
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| March 2015 | June 2014 | Change | % Change | | Bakken | Oil | 66.5 | 117.9 | -51.5 | -43.6% |
| Gas | 4.6 | 5.9 | -1.3 | -21.7% |
| Total | 71.0 | 123.8 | -52.7 | -42.6% | | Eagle Ford | Oil | 86.7 | 153.6 | -66.9 | -43.6% |
| Gas | 22.2 | 29.6 | -7.5 | -25.2% |
| Total | 108.9 | 183.2 | -74.4 | -40.6% | | Haynesville | Oil | 2.9 | 6.0 | -3.1 | -52.1% |
| Gas | 20.8 | 30.8 | -10.0 | -32.5% |
| Total | 23.6 | 36.8 | -13.1 | -35.7% | | Marcellus | Oil | 2.8 | 5.1 | -2.3 | -45.1% |
| Gas | 49.3 | 67.0 | -17.8 | -26.5% |
| Total | 52.1 | 72.2 | -20.1 | -27.8% | | Niobrara | Oil | 20.9 | 38.3 | -17.3 | -45.3% |
| Gas | 14.0 | 20.7 | -6.6 | -32.1% |
| Total | 35.0 | 59.0 | -24.0 | -40.7% | | Permian | Oil | 98.1 | 170.2 | -72.1 | -42.4% |
| Gas | 18.9 | 26.0 | -7.2 | -27.5% |
| Total | 117.0 | 196.2 | -79.2 | -40.4% | | Utica | Oil | 3.0 | 3.0 | -0.1 | -2.6% |
| Gas | 5.7 | 4.9 | 0.8 | 16.6% |
| Total | 8.6 | 7.9 | 0.7 | 9.2% | | Total | Oil | 280.8 | 494.1 | -213.3 | -43.2% |
| Gas | 135.4 | 184.9 | -49.5 | -26.8% |
| Total | 416.2 | 679.0 | -262.8 | -38.7% |
| | Price | Oil | $50.04 | $105.12 | ($55.08) | -52.4% |
| Gas | $2.947 | $4.571 | ($1.623) | -35.5% |
| | Shale Play Production |
| March 2015 | June 2014 | Change | % Change | | Bakken | Oil | 1.33 | 1.12 | 0.21 | 18.4% |
| Gas | 1.56 | 1.28 | 0.28 | 21.5% | | Eagle Ford | Oil | 1.73 | 1.46 | 0.27 | 18.6% |
| Gas | 7.52 | 6.48 | 1.03 | 15.9% | | Haynesville | Oil | 0.06 | 0.06 | 0.00 | 0.6% |
| Gas | 7.06 | 6.74 | 0.31 | 4.6% | | Marcellus | Oil | 0.06 | 0.05 | 0.01 | 15.4% |
| Gas | 16.71 | 14.66 | 2.05 | 14.0% | | Niobrara | Oil | 0.42 | 0.36 | 0.05 | 14.9% |
| Gas | 4.77 | 4.53 | 0.24 | 5.3% | | Permian | Oil | 1.96 | 1.62 | 0.34 | 21.1% |
| Gas | 6.40 | 5.70 | 0.71 | 12.4% | | Utica | Oil | 0.06 | 0.03 | 0.03 | 104.5% |
| Gas | 1.92 | 1.06 | 0.86 | 80.9% | | Total | Oil | 5.61 | 4.70 | 0.91 | 19.4% |
| Gas | 45.93 | 40.46 | 5.48 | 13.5% |
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