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US Oil Activity: Providing Context

With oil markets reeling from COVID-19 and Saudi Arabia’s price war, the intent of this blog is to take a step back and provide some context for US oil activity, including drilling and production, and is geared towards those not as in the weeds with the details of the space. The current market turmoil is fundamentally changing outlooks, but it is useful to know where we are coming from to understand where the impact is being felt. Note this analysis focuses on regions that BTU Analytics considers oil-directed, and excludes gas-directed activity (for example, Appalachia).

Most of the drilling activity targeting oil production over the past several years has occurred in four core shale plays: the Permian, Eagle Ford, Bakken and DJ, as illustrated in the map below, with green counties indicating the highest drilling activity. The bulk of wells drilled over the past five years has really been concentrated in a handful of counties within these plays. Other notable oil producing regions include conventional production in the San Joaquin Basin in California, Gulf of Mexico and Alaska (not pictured below).

Looking at drilling activity over the past few years, the Permian, Eagle Ford, Bakken and DJ have steadily made up about 80% of total oil-directed activity. The overwhelming growth in the Permian is apparent in the figure below, and in 2019 made up 45% of total wells drilled in oil regions.

Production from these four core shale regions accounted for about 65% of total US oil production in 2019, up from about 55% in 2015, as shown in the figure below. The Permian has seen the greatest gain over the past few years, exceeding 4 MMb/d in 2019 or one third of total US production.

So, given that context, where are we headed after the dramatic fall in oil prices? Production has been growing, but now will it fall, where will it fall and for how long, given producers have revised down capital budgets and drilling forecasts down in reaction to the price collapse? Check out the recent Upstream Outlook for a spotlight piece on forecast revisions, and to keep up to date on our production outlook trending in these turbulent times. Also, BTU Analytics is currently offering all of our existing clients one-on-one webinars with our latest thoughts on the outlook for gas and oil markets in this rapidly evolving market. If you are not currently a client but would like to schedule a one-on-one presentation, please submit an inquiry.

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Marissa Anderson is the Manager of Data Analytics at BTU Analytics, LLC. She has diverse experience in the energy industry including fundamental analysis, investor relations and engineering. Prior to joining BTU Analytics, Marissa was a Senior Investor Relations Analyst with MarkWest Energy Partners, L.P., and a Senior Energy Analyst with Bentek Energy where she focused on the Natural Gas Liquids market. Marissa holds a B.S. in Chemical Engineering from the Colorado School of Mines, an M.S. in Global Energy Management from the University of Colorado Denver, and is a licensed professional engineer in the state of Colorado.

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