Drilling Efficiency Continues to Climb in U.S. Shale

Oil and gas operators are continuing to improve their drilling techniques, leading to increases in total output on a per-rig basis. New data from the U.S. Energy Information Administration’s Drilling Productivity Report projects that both oil and gas production will increase in April 2014 from a month earlier in several major shale plays around the country. Five of six shale plays tracked by EIA’s report have showed an increase in drilling productivity on a per-rig basis over the last few years.

For example, the average rig operating in the Bakken will be able to produce 492 barrels of oil per day next month from a new well, compared to 485 bpd in March. Similar gains are seen for natural gas. An average rig drilling in the Marcellus Shale will be able to produce 6,476 thousand cubic feet of natural gas per day in April, which will be higher than March’s 6,402 thousand cubic feet per day.

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Greater efficiency has allowed the industry to send a record number of rigs to America’s shale plays. New data from Baker Hughes shows that 1,443 oil rigs are currently in operation. The technological improvements that initially sparked the shale gas revolution continue to improve. Even from just a few years ago, precision in horizontal drilling has improved, allowing more rigs to operate in harder to reach fields.

Moving forward, the industry should be in pretty good shape with prices working a bit more in their favor. Oil prices (WTI) have hovered around $100 over the last few weeks. Natural gas prices are much higher than they were at any time in the last four or five years. With production already high and per-rig efficiency continuing to improve, higher prices may support greater drilling activity in shale plays around the country, especially the Marcellus, Utica, and Haynesville shales.

By Charles Kennedy of Oilprice.com