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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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U.S. Shale Firms Drill Deeper Wells In Search Of Efficiency

  • Despite the loss of active drilling rigs, shale firms are producing more oil and gas and have even exceeded some skeptical projections from earlier this year.
  • The average drilled lateral length during the second quarter was around 12,400 feet, or a 5% increase compared to the average last year.
  • In the Permian the average well horizontal length more than doubled in 12 years.
Rig

The U.S. shale patch is looking to do more with less as it seeks capital and operational efficiency to prove to shareholders that it has turned the page from growth at all costs to measured growth accompanied by higher returns to investors.

The oil and gas firms operating from the Permian to Marcellus shale plays are drilling increasingly deeper lateral wells as drilling rigs are fewer, but wells are longer.

The total number of active drilling rigs in the United States rose by 1 last week, according to data from Baker Hughes published on Friday.

The total rig count rebounded to 632. But so far this year, Baker Hughes has estimated a loss of 147 active drilling rigs. Last week's count was 443 fewer rigs than the rig count at the beginning of 2019 prior to the pandemic.

The number of oil rigs rose by 1 to 513, down by 108 so far in 2023. The number of gas rigs fell by 1 to 113, a loss of 43 active gas rigs from the start of the year. Miscellaneous rigs rose by 1.

Despite the loss of active drilling rigs, shale firms are producing more oil and gas and have even exceeded some skeptical projections from earlier this year.

Efficiency in operations and capital expenditure is now king in the shale patch, and companies are trying to prove this by having longer wells drilled. The records in longer well drilling are being set by gas producers more than their primarily oil-focused peers.

Natural gas producer Range Resources, for example, said on its Q2 earnings call in July that it continued to improve efficiencies and set new program records during the second quarter.

The average drilled lateral length during the second quarter was around 12,400 feet, or a 5% increase compared to the average last year, CEO Dennis Degner said. Related: Rig Count Sees Small Gain As WTI Holds At $87

"As part of Q2, the team also added four wells with lateral length exceeding 20,600 feet. These represent the longest laterals drilled in the program's history with the longest misery just under 22,000 feet," Degner told analysts on the call.

Efficiencies led to an average daily lateral footage drilled exceeding 4,700 feet per day in Q2, representing a 42% jump from last year's average.

"This was driven by rig equipment changes that could benefit future development programs," Degner said.

Commenting on the increasingly longer wells, the executive told The Wall Street Journal,

"There is still some additional length to reach."

The laterals of the horizontal wells in the U.S. have jumped in the decade since 2010, when the shale industry was in its infancy.

In the Permian, for example, the average well horizontal length more than doubled in 12 years—it increased to more than 10,000 feet in the first nine months of 2022, compared with less than 4,000 feet in 2010, the EIA said last year, commenting on record new well productivity in the most prolific U.S. shale basin.

Aiming to reward shareholders, U.S. oil and gas firms spent more of their revenues on dividends and share buybacks than on exploration and production in new wells in 2022 – for the first time ever, a study by E&Y showed last month.

With fewer rigs, the shale patch—especially gas producers in Pennsylvania—are looking to drill the longest laterals to boost growth without too much new drilling.

It looks like they have been successful so far—the U.S. oil and gas firms are set to deliver stronger-than-anticipated production gains this year.

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Large companies, including Chevron, Exxon, ConocoPhillips, and Pioneer Natural Resources, reported record Q2 production in the Permian or raised full-year 2023 guidance, or both.

Yet, the longest lateral is not the answer to sustained production growth for U.S. shale in the medium to long term. At some point, the longer wells will not lead to better productivity and financial gains, analysts warn.

"We have probably reached the maximum we can do on a per-well basis," Alexandre Ramos-Peon, head of shale research at Rystad Energy, told The Journal.

"Then it's just a matter of being a volume game or waiting for the next technology breakthrough."

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Mamdouh Salameh on September 11 2023 said:
    Whilst US shale oil companies are drilling deeper wells in search of efficiency, it could also a be a confirmation that the lucrative and easy-to-produce spots have been exhausted forcing shale drillers to move to poorer and costly spots, hence the rise in production costs and the decline in production.

    Shale oil is a spent force despite the hype by the US Energy Information Administration (EIA) about rising US production.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • JDRebel on September 11 2023 said:
    US Shale companies are not drilling deeper for efficiency they are drilling longer laterals.

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