Number of U.S. DUCs Continues to Accelerate

The number of drilled but uncompleted (DUC) wells in seven key oil and natural gas production regions in the U.S. has increased over the last two years, reaching a high of 8504 wells in February 2019, according to well counts in the Energy Information Administration’s (EIA) Drilling Productivity Report. The most recent count, at 8500 wells in March 2019, was 26% higher than the previous March.

Drilled but uncompleted wells, also known as DUCs, are oil and natural gas wells that have been drilled but have not yet undergone well-completion activities to start producing hydrocarbons. The well-completion process involves casing, cementing, perforating, hydraulic fracturing, and other procedures to produce crude oil or natural gas.

The number of DUCs has generally increased since the end of 2016, EIA observes. A high inventory of DUCs may be attributable to economic factors or resource constraints. For example, a low oil and natural gas price environment may postpone well completion activities in areas where the wellhead break-even price is too high relative to the current market price.

Another example may be the lack of available well-completion crews to perform hydraulic fracturing activities in areas of high demand. Takeaway capacity, or the ability to transport hydrocarbons via pipeline away from the resource play, may also place additional constraints when pipeline networks are insufficient to accommodate supply.

Most of the recent increase in the DUC count has been in regions dominated by oil production, especially the Permian region that spans western Texas and eastern New Mexico. As of March 2019, nearly half of all the total DUCs included in the Drilling Productivity Report were in the Permian. The Permian Basin experienced take- away constraints in the second half of 2018, but recent pipeline capacity additions in the region have reduced some of the backlog. Other pipeline projects are planned or are currently under construction.

In contrast to oil-directed regions, the number of DUCs in natural gas-dominated areas such as the Appalachian region and the Haynesville Shale in south- western Arkansas, northwest Louisiana, and east Texas has decreased by nearly half over the past three years, from 1230 wells in March 2016 to 713 wells in March 2019.
New pipelines in these areas have increased the ability to transport natural gas to demand centers in the Northeast and Midwest.

Production in the seven Drilling Productivity Report regions, which are characterized by tight oil or shale gas formations, totaled 8.2 MMbbld of crude oil and 77.1 Bcfd of natural gas in February 2019, or 70% of total U.S. crude production and 71% of total U.S. natural gas output.

EIA’s estimates of DUC counts may differ from other sources because of differences in methodology and assumptions. The agency develops its estimates of DUC counts using a consistent methodology and uniform assumptions across regions. More information on drill- ing and production metrics is available in EIA’s Drilling Productivity Report at eia.gov/petroleum/drilling/, and more comprehensive details on total oil and natural gas production are provided in the agency’s Monthly Crude Oil and Natural Gas Production Report at eia.gov/petroleum/ production/.

(SOURCE: The Weekly Propane Newsletter, May 20, 2019)