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".... recent analyses indicate a decline in well performance and an increase in breakeven prices, suggesting a possible exhaustion of Tier 1 acreage. Specifically, wells drilled between 2023 and 2024 showed an average productivity decline of 5% per lateral foot compared to those drilled between 2021 and 2022. The Bone Spring Formation experienced a 12% decline, while the Wolfcamp Formation saw a 1% decrease across the greater Permian Basin."
When determining the performance, or "productivity" of a HZ shale oil well the only metric that matters is estimated ultimate recovery (EUR). Far too many analysts focus on how much the initial potential (IP's) of a new well has increased and how much oil the well makes in the first two to three years of production life. Unless you are a working interest owner worried about cash flow, and how fast you can get your money back after investment, none of that matters. How much oil these shale oil wells MAKE, ultimately, are vital to our nation's long term energy security.
Are wells producing the maximum amount of recoverable oil within reach of the hydraulic frac... is what matters. EUR's are important to American's concerned about their hydrocarbon future, and believe it or not, should be important to shale producers as higher EUR's increase the total financial return on initial capital investment. Its really not always about...money.
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Though longer laterals are generating higher IP's, todays shale oil wells are declining much faster than years past. In 2018 a type well in both sub-basins of the Permian had a first 14 month decline rate of 47%, today wells typically decline at the accelerated rate of 73% in the first 14 months.
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As the shale sector has lost it's ability to borrow outside capital as a source of funding new wells, it is now required to stand on its own financial feet using production revenue to service debt, pay dividends and stay on the drilling hamster wheel. Wells are designed for maximum up front cash flow and are produced accordingly. Choking well production to manage gas to oil ratios and optimize recovery rates, or EUR's, is secondary to getting as much money as possible from the well, as fast as possible.
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So when analyzing data, lots of data can be manipulated by the intent of an operator and what its operational methodolgy is.
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EUR's have been declining since 2016 in the Permian Basin. I wrote the article below for the Permian Basin Oil &Gas Magazine a year ago.
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You may click on the image to read the article. ​​
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In my opinion EUR's are declining from overdrilling sweet spots, or core areas of the Permian where shale quality is the best, and operators can make the most cash flow the fastest.
Signficantly degredation has occured in core areas because wells are drilled too close to each other, produced too hard, too fast, and are suffering signficant pressure depletion. In core counties like Midland and Martin Counties in the Midland Basin, or Lea and Loving Counties in the Delaware Basin, early wells had higher EUR's. The "learning curve" resulted in higher IP's over the years and lower EUR's.
There are currently 55,000 producing HZ wells in the Permian Basin and my reserach suggests 85% of those wells were drilled in very well defined core areas of just 8-9 counties in both sub-basins. Many of those wells in the Midland Basin are drilled in the same bench less than 600 feet apart. Some wells in the Phantom Wolfcamp Field in the Delaware Basin were actually drilled in the same bench on less than 500 feet spacing. The closer together they were drilled, the lower the EUR's.
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On the left is a chart from TGS article in the post opening. It shows how significantly EUR's in Wolfcamp benches in the Delaware Basin have declined since 2021. The two most prolific Wolfcamp benches in this area are Wolfcamp A (black) and Wolfcamp B (green), both show signicantly steeper EUR decline during the year 2023, when you will recall the Permian Basin was becoming more "efficient" by producing more oil with fewer rigs. I was calling dung heap on this a year ago. A five percent (5%) decline in EUR's during that time frame is significant. This chart is normalized per foot of lateral, by the way.
Sharp increases in EUR's per lateral foot relative to secondary Wolfcamp benches are all now being drilled with longer laterals that produce higher IP's. One year of production data does not make an EUR and we have previously discussed how much steeper today's first year decline rates are. Its important not to fall for the crap.
Novi, on the right, seems to agree that well productivity per foot lateral also peaked in 2016 in the entire Permian, both sub-basins.
If you read the TGS article you will see that the most prolific benches in the Delaware Basin, the Bone Springs series, its EUR's per lateral foot have declined much more. This should be alarming to the casual observer; the Midland Basin is pretty much done...stick a fork in it. America's oil eggs now lie entirely in the very gassy, Delaware Basin.
CONCLUSIONS:
Thru April 2025 some 55,000 producing HZ wells exist in the Permian (TRRC) and an additional 6,000 wells delineate the productive limits of the Permian HZ play including inactive DUC's, temporary abandoned wells and wells that have been plugged and abandoned (Novi). This since the beginning, in 2013.
Thur April we believe the Permian shale oil play has produced approximately 14.9 G barrels of oil. That works out to be 270,900 BO per well to date. I look for the ultimate UR of thse 55,000 wells to be something in the order to 24.7 G BO.
The best wells in the play have already been drilled in the core areas of the Permian Basin and EUR's are declining. The heart of the watermelon has been eaten. The rate of EUR decline is exponentially increasing now, due mostly from over-drilling cores on too close of spacing between wells.
At product prices of less than $90 oil and $5 natgas, I do not see another 60,000 HZ wells being drilled in the Permian Basin. If there are 60,000 wells drilled in the future it will require additional indebtedness. 75% of those wells will be out on the flanks, in places like Irion County, or Culberson County in Tier 3 and 4 level acreage where C+C EUR's will be even less.
So if you think the next 60,000 wells drilled in the Permian will produce another 15 G BO over the next 10 years, you will be sadly disappointed and at some point might ask yourself about oil and natural gas exports..."what the hell were we thinking?"
When considering all the predictions about ultimate resource recovery from the Permian Basin shale play, remember the title of the book, Too Much By Half. As Mother Nature puts Her foot down, costs to extract need to go down, not up, as they are doing now.
Americans are going to have an absolute shit fit when the find out
exactly how much they have been lied to about all this shale oil and
shale gas stuff.
50% of a Permian Basin's total EUR is realized in the first 36 months of production, 90% by year 16. This chart from a Research Gate White Paper is dated 2021. Both WOR and GOR in both sub-basins of the Permian have increased signficantly since 2021 and with the onslaught of longer laterals and ensuing steeper decline rates I now believe 65 + % of a well's EUR is being reached within 36 months.
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Novi predicts EUR's based on a 30 year production life.
55% of shale oil production from the Permian Basin comes from new wells less than 3 years old (Ted Cross, Novi) and are all on course to decline 83% the first 3 years of production (Novi, lower right).
50% of all producing wells in the Permian Basin shale play now make less than 30 BOPD and 100 BWPD on artifical lift. They are declining at the rate of 12% annually (Novi, Enverus, Welldatabase).