The Energy Inaccuracy Agency (EIA) recently stated it expects tight oil production in the US to reach an all time high by 2023. We can only assume that a lot of this tight oil growth will have to come from the Permian Basin and the vast, Delaware sub-basin in particular. The Delaware is the wild, wild west and offers the biggest area, with the most benches, to grow US tight oil production...one giant tub of Wolfcamp oil, so most seem to think.
Lets look at some charts of of the top producing counties in the Delaware, the biggest operators, and use some common sense to see if the EIA is shooting us straight. In other words, lets look at some trees, first, before we look at the damn forest...
Lea County in New Mexico is the 2nd largest producing county in the Delaware. In 2021 more than 1/4th of all the HZ rigs running in the entire Permian Basin ran in Lea. Only Eddy Counties in New Mexico and Reeves County in Texas had more wells drilled in them than Lea.
EOG ran with the big dogs in Lea County in 2021; that's its big acreage position in the Delaware and when it finds a safe place to hang out, it then carpet bombs that place with wells. Like Karnes and Gonzales Counties in the Eagle Ford. This is Wolfcamp/Bone Springs country, Lea County is.
Here is how EOG did in 2021 in Lea County with regards to well quality. Whoa Nellie. EOG just declared to the American public it was prepared to ramp up production if called upon. Its going to take a lot of wells to doing any rampin.'
If you wanted to grow up and become a tight oil operator in America you would want to start, and end your career in Loving County of the Delaware of West Texas. There are many, many war horse wells in that County, it IS Hotel Delaware...and I am not talking about a La Qunita.
Oxy is a big player in Loving County, one notch down from EOG but way more active with scooting rigs around. Line thickness in the ranking column is a function of well numbers.
Oxy's 2020 well productivity was below the previous four years productivity; 2021 looks to be a disaster, possibly the worse tight oil wells its drilled in company history. Oxy's interest on long term debt is equal to the GDP of South Africa; don't for a minute think with oil AND gas prices high in 2021 it was voluntarily choking back wells for pressure preservation and long term reservoir management.
The west half of Loving County is gassier than the dickens and high initial GOR's are probably what makes this county like a tight oil ATM machine. But now GOR is rising quickly, a probable indication of over drilling and pressure depletion, perhaps, and not a good sign. The Delaware Basin is very gassy and getting gassier. Its also very watery.
I get stuff like this on the left sent to me all the time from field operators, engineers, etc.; concerned folks who live with this tight oil stuff every day. These are Eddy County wells in New Mexico, where it is real gassy. Look what happens to GOR in 24 months when a unit is over drilled.
Reeves County, Texas in the Delaware sub-basin, is the 2nd best place you oughta be; its loaded with wells that use to be really good. Its the 3rd largest producing County in the Delaware and mighty Oxy is a big, big player in Reeves; Reeves is where Oxy pissed off $55 B buying Anadarko...so it better be a big player in Reeves County. But its 2021 wells went south in terms of well productivity, big time...like on an express elevator to hell.
Using past well productivity over a given time in hopes of predicting future well performance is always iffy in the oil biz. Nothing is certain but change itself. IP's and the ensuing 3 to 12 months of production can be almost whatever an operator wants them to to be based on lateral length, frac design and how the well is produced, post stimulation. When prices are high, open the well up and let 'er rip! EOG is the master of disaster in this regard.
Its far better to look at how the well has performed over a 24 and 36 month period. Cash flow in only important to the tight oil industry itself, day traders at Seeking Alpha and the EFT crowd on Twitter. What most of Americans interested in this shale oil show NEED to know about is ultimate recoveries and whether the tight oil sector can deliver on its promises of abundance and if there is enough return on initial investment for it to not have to add debt.
In Reeves County, after 24 months, well productivity has been on the steady decline since 2016, in spite of increasing lateral lengths, stuffing more sand in longer laterals, and much higher wells costs. Operators are spending more money, and having to drill more wells, to maintain.
This post is NOT an exercise in economics; associated gas and NGL's play a BIG role in economics in the very gassy Delaware; its about the stuff America needs for transportation fuel.
Declining well productivity in the Delaware begs the question, once again: why is 70% of all Permian tight oil production being exported to foreign countries and isn't OUR nation going to need that oil ourselves someday very soon?
Thanks to shaleprofile.com and its amazing analytical tools we can do this all day long. I mean ALL day long. Per county, per bench, per operator... things ain't near what people say they are. These well productivity graphics are from realized production data filed with the TRRC and NMOGC; no lying and not much room for 'interpretation."
What's the point? Well, its getting crowded in the top producing counties of the Delaware and well productivity in those counties, by the biggest operators, is going down. For all this growth to occur that the EIA and many others say will occur, its going to take a lot more wells, a lot more money, at a lot higher costs per well, a lot more groundwater going in and a lot better places to put produced water when it comes out. And if Delaware operators don't want to add a lot more debt to their balance sheets, profit margins need to a lot higher than ever before.
It may happen by 2023 the way the EIA says; who knows.
But so the hell what? What happens after that, and after that? This growth stuff simply cannot continue. There isn't enough undrained rock left in the Permian Basin and wells in core areas of the best counties are simply not as good as they use to be. None of this EIA growth dookey means anything for the average American consumer anyway...it will ALL get exported.
Giddy up, America!