EIA revises estimate of drilled and completed wells in the Permian region (5/17/2023)

In our monthly Drilling Productivity Report (DPR), we estimate the number of wells in seven major U.S. oil and natural gas producing regions across three categories: wells drilled and wells completed, with the remainder being wells drilled but uncompleted (DUC). We determine well completions based on weekly filings reported to FracFocus. Submissions usually lag by several weeks, so we forecast recent completions using modeled estimates and analyst judgment. Based on industry and trade press reports indicating completion crews moved from other natural gas regions to the Permian region, we increased our estimate for monthly well completions in the Permian region and decreased our estimate of DUC wells from the March DPR in the April DPR. After our April DPR release, FracFocus reported an unusually large number of well completions in the Permian region because some operators submitted several years’ worth of unreported completions. This revision affects not only the estimate of completed wells but also the number of drilled wells because it implies more available wells for completion. These changes also increased our estimate of DUC wells in the Permian region in the May DPR, nearly reversing the changes made in the April DPR.

In the April DPR, we estimated that 5,328 wells were completed in the Permian region in 2022, averaging more than 440 wells per month. In the first quarter of 2023, we estimated the pace increased to average more than 460 wells completed per month. In mid-April, however, operators submitted a total of more than 1,100 Permian well completions during a single week to FracFocus. Normally, operators in the Permian region submit about 100 wells each week, although weekly submissions can range between 30 to more than 200 wells. This submission was not an error. It represented more than two years of late completion filings. The bulk of these completions occurred in 2022, leading us to revise up 2022 monthly completions by more than 50 wells in some months from the April DPR to the May DPR. Ultimately, we increased our estimate of 2022 well completions in the Permian region to 5,704 wells, averaging 475 wells completed each month (Figure 1). We will continue to make revisions in future DPR releases as warranted following incoming FracFocus submissions.

Unlike for well completion filings, we determine the number of wells drilled each month by estimating the productivity of the active oil rig fleet. Small changes in estimated productivity can have a large effect on the number of wells we estimate were drilled. In previous DPRs, we assumed the average oil rig in the Permian region in 2022 could drill about 1.2 wells per rig-month (the monthly average rigs reported from Baker Hughes). The revision in well completion filings from FracFocus indicated a substantial revision in the number of drilled wells available for completion, which implies rig productivity had been higher than our estimates.

As a result, we revised our estimates for the number of drilled wells by using a higher rig efficiency of slightly more than 1.3 wells per rig-month. We did not change the active oil rig count, which we collect from Baker Hughes, but we changed how many total wells each rig can drill per month. Because this information is inherently uncertain, we rely on analyst judgment, industry estimates, trade press reports, and modeled trends to estimate the rig efficiency.

Our revised productivity per rig increased the number of drilled wells we estimate in the Permian region. In the April DPR, we estimated operators drilled 4,813 wells in 2022, averaging 401 wells per month. In the May DPR, we now estimate operators drilled 5,264 wells in 2022, averaging 439 wells per month (Figure 2). We now believe that active drilling rigs were about 10% more productive in 2021–2022 than we had estimated.

Because we determine our estimate of DUC wells by subtracting the number of wells completed each month from the total number of wells drilled, the revisions to both the number of wells drilled and number of wells completed also affect our Permian DUC well count. Even though the direction and magnitude of the changes to our estimates of drilled wells and completed wells were similar, the cumulative effects of revisions to more drilled wells compared with completed wells throughout 2022 increased our DUC well estimate compared with the April DPR (Figure 3). In the May DPR, we estimate that Permian DUC wells ended 2022 with 1,069 wells, revised up from 843 wells in the April DPR. As of April 2023, we estimate 910 DUC wells are in the Permian region. Had we only revised well completions following the new FracFocus submissions, our estimate of the DUC well count would be less than zero, making the revision to drilled wells necessary and warranting a higher rig productivity estimate.

Although we revised well counts in the Permian region, this process has not affected our historical estimated crude oil production in the region because operators had already submitted their crude oil production to the states. We survey oil production by state in our EIA-914 survey and publish estimated state and national totals on our Monthly Crude Oil and Natural Gas Production page. Even though we may revise region-level estimates in the DPR each month, the changes to annual averages tend to be small and must be consistent with our state-level data published in the EIA-914 survey. Despite changes to the well counts, we have not changed our 2022 Permian crude oil production estimates, and in both the April and May DPR, we estimated 2022 Permian crude oil production averaged 5.3 million barrels per day.