What's new in production

The current iteration of an annual report by the U.S. Energy Information Administration, “The Distribution of U.S. Oil and Natural Gas Wells by Production Rate,” poses this question. While the answer may seem obvious, precision is required to organize the data. EIA’s definition has five parts: 1) single wellhead; 2) sidetrack; 3) completion; 4) recompletion; and 5) lease.

As the agency tells it, one way of developing deeper insight into the rapid growth in U.S. oil and natural gas output during the past few years, driven by technological innovation in drilling and production, is to probe how U.S. oil and natural gas wells have changed. This report looks at the distribution of wells,
by size and technology, to understand these trends.

An overview is revealing. U.S. oil production reached 10.04 MMbpd in December 2017 and 10.96 MMbpd in July 2018, and U.S. natural gas gross withdrawals reached 96.97 Bcfd in December 2017 and 100.24 Bcfd in July 2018. At the same time, the number of U.S. producing wells increased from 735,000 in 2000 to a high of 1,039,000 wells in 2014, and declined in number to 991,000 wells in 2017—likely because of lower oil prices. Technological change is reflected in how the share of horizontal wells during the past decade increased from 3% to 12% (2008–2017). As a result, most U.S. oil and natural gas production comes from wells producing between 100 boed and 3,200 boed. Interestingly, the share of U.S. oil and natural gas wells producing less than 15 boed has remained surprisingly steady at 80% from 2000 through 2017.

This report provides yearly estimates of the number of U.S. producing oil and natural gas wells, which are grouped into 26 production volume brackets, ranging from less than 1 boed to more than 12,800 boed. Wells are designated as either oil or natural gas wells, based on a gas-oil ratio (GOR) of 6,000 cubic feet (cf) of natural gas to 1 barrel (bbl) of oil (cf/bbl) for each year’s production. If the GOR is equal to or less than 6,000 cf/bbl then the well is classified as an oil well. If the GOR is greater than 6,000 cf/bbl, the well is classified as a natural gas well.

Data quality and completeness vary. In these data-obsessed times, it’s a bit of a surprise to learn that the quality and completeness of the available data, used to build the tables, vary by state. The data originate from state administrative records of monthly well- or lease-level natural gas and liquid production. EIA receives the data from a commercial source, which collects the data from the various state agencies. Some state agencies do not make well production data available until years after production occurs, and others have never made well production data available. For the late-reporting states—Kentucky, Maryland and Tennessee—the last year of reported data is used to populate recent missing years to achieve the most complete U.S. total well counts. Data are not available for Illinois and Indiana.

The report includes every producing entity in the commercial database. When the number of wells on a lease is available, the total lease production is equally distributed among the wells; although, in some cases, the commercial source has allocated individual well production in proportion to well test results. Sometimes, only a lease and its total production are available, without the well counts. This situation leads to undercounting wells in some areas.

Production volume accounting. Where it was identified, reinjected and recycled, natural gas was removed from the gross gas volumes reported by states such as Alaska. For fields identified as having undergone or are undergoing natural gas injection, production levels are reduced by an equal share of the field-level injected natural gas reported by the states. Injection wells are not included in the counts, unless they were once producing wells; in such cases, they are included for the years they were producing.

The pressure base used to record natural gas volumes varies by state. For consistency, [all natural gas volumes were converted] to the federal pressure base of 14.73 psia. However, [adjustments were not made] to account for differences in the temperature base. Because states vary in how they define a well type (oil or gas), [a gas-oil ratio of greater than 6,000 cf/bbl was used to differentiate natural gas wells from oil wells].

Frequently asked questions. The report also contains FAQs. Here are two worth citing:

Q. What is the average production rate of a well, and how does this rate differ between oil wells and natural gas wells?

A. In 2017, the average oil well produced 21 bpd, while the average natural gas well produced about 140,000 cfgd. However, the distribution is generally skewed. Many wells produce smaller volumes per day and fewer wells produce very large volumes per day. In 2017, 81% of the nearly 1 million U.S. wells produced 15 or fewer boed, and 5% of the wells produced more than 100 boed.

Q. What are some of the key conclusions that can be drawn from your data?

A. Although the total number of operating U.S. oil and gas wells has decreased about 5% from a peak in 2014, from more than one million to just under 991,000 in 2017, the total number of horizontally drilled wells has increased 28% from slightly less than 100,000 to more than 126,000 wells. Oil and gas wells drilled horizontally through hydrocarbon-bearing formations are among the most prolific wells in the U.S. For now, the industry has reason to congratulate itself. Forecasting is risky business, but, as a longtime industry observer once said, “the more we use, the more we find.”  WO