396,000 marginal stripper oil wells produced 284 million barrels of oil in 2016 in the United States.
So who really gives a rats ass, right? All of the US shale oil industry, from floor hand to CEO, thinks their shit doesn't stink and shale oil is America's future. The media feels the same way; when is the last time you read an article on Forbes about the plight of the US stripper well industry?
Stripper wells are not sexy. They don't require big drilling rigs with elevators or frac spreads that cover two football fields. They don't require billions of dollars of other people's money to drill and are generally unremarkable because they make money. Because of that there is not much for pundits, ANALysts and journalists (that once drove by a drilling rig on the highway and consider themselves experts), to say about them. They're boring.
How Many Shale Oil Wells Would It Take to Replace America's
Stripper Well Production?
All of America's oil future now appears to lie in the Permian Basin. That's where all the rigs are running. Why I am not sure; at $35 net WH prices a HZ shaley carbonate well in the Permian has a better chance of getting hit by lightning than paying out. But let's pick the most prolific bench, the Wolfcamp, in America's hottest shale oil basin, the Permian, and have a look see...
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Based on realized production data filed with the Texas Railroad Commission (there is no lying allowed at the TRRC!) and collected by shaleprofile.com, the average first 12 month production for a Permian Basin Wolfcamp well is 159,000 BO. It would therefore require 1,786 wells to reach 284 million barrels of annual oil production and given the known first year decline rates for this bench it would require 1.7 more wells per day more to sustain that 284MM BO. That's 620 more wells that would have to be drilled during the same one year time frame to maintain 284MM BO annual production rates. The answer is then 2,406 Permian Wolfcamp wells would be required to replace America's stripper well production for a given year.
How Much Would It Cost To Replace America's Stripper Well Production With Permian Wolfcamp Wells?
2,406 wells X $8.5MM per well total D&C costs (EIA, IHS, PXD Investor Presentations) = $20,455,250,000, as in billion
+ 620 wells per year, thereafter = $5,300,000,000, as in billion*
* providing Wolfcamp well productivity does not continue to fall.
That's sort of a dumb way at looking at how many Wolfcamp wells it would take to replace stripper wells. Another way of looking at it is that stripper well production represents 625,000 BOPD in America and to replace that conventional production the Permian Wolfcamp business would have to drill 500 wells each year, every year, at a cost of $4.2 billion per year. That is assuming Wolfcamp wells have a 450K BO EUR and STAY at that level of productivity, which they cannot. The Midland Basin is getting the snot drilled out of it.
So let's keep our priorities straight...shale oil was just an expensive seed bump in the long road to depletion in our country. It's only one answer to a very big problem. Peak affordable oil is upon us.
And remember, every stinking "monster" shale oil well in America is going to be a stripper well someday very soon. YOU paid, in a roundabout way to drill them, now YOU will pay, in a roundabout way, to plug and abandon them. Along the way you made a lot of CEO's and royalty owners very happy.
Stripper well production in America is paid for, and profitable, even at $45, some of it < $40. Its reliable because its annual decline is typically less than 3%. It also provides job security to many. It's important to our nation's oily future.