We are well into 1Q2015 earnings season and many producers are touting improved well results in plays such as the Eagle Ford, Bakken and Permian, as producers have high graded their acreage and completions as we predicted back in a December post on high grading. However, what we failed to discuss back in December was the impact of not just high grading acreage, but high grading equipment and crews. Horizontal rig counts have plunged 48% since October of last year with almost all of the top 10 plays, as ranked by number of horizontal wells, experiencing sharp declines in activity as cash flow from operations has cratered in the lower price environment.
While drilling rigs have been stacked into every nook and cranny of the oil patch, the crews available to work the remaining rigs are now cherry picked from among the best roustabouts in the business, and that cherry picking is paying dividends for producers as drill times have already seen exceptional reductions since the crash began in October.
The time to drill a horizontal well in the Central Williston (Bakken Core) has declined from an average of 16 days in October 2014 to 14 days in March 2015. Preliminary data for April indicates further reductions to just 11 days according to data provided by Datawright Rigdata and in the Eastern Eagle Ford, drilling times have plummeted 20% to just 12 days on average for March & April.
While the number of horizontal rigs operating in these plays has dropped 47% since October, the number of horizontal wells drilled in these plays has only declined ~26%. Faster drilling times, higher per-well productivity, a significant backlog of drilled but uncompleted wells, and oil prices creeping back above $60/barrel on “fear” of rapidly declining oil production all look to point towards a sharp reversal in any decline in US output as producers lock in the efficiency gains seen to date.