Eagle Ford Shale production isn’t expected to fall as fast as the price of a barrel of oil, one industry expert said Monday.
“There is a lot of production in motion and a lot of momentum right now,” said Thomas Tunstall, research director of the Institute for Economic Development at the University of Texas at San Antonio.
Part of the momentum might be the result of permits issued before the drop in the price per barrel of oil, he said. Once the Railroad Commission of Texas issues a drilling permit, a company has two years before the permit expires.
As the price per barrel of oil continues to drop, so has the number of drilling permits for new wells.
“We might see an increase in production for a few months,” Tunstall said. “But production will not increase as quickly as it did last year.”
The last time the rig count was above 100 was the week ending Nov. 22, according to Advocate reports. Since then, the count has fallen to 84 the week ending Jan. 30.
But the number of completed wells has grown significantly during the past week, said Patrick Forbis, editor of Texas Drilling Observer, which submits information to the Advocate for its weekly Gushers and Dusters reports.
The reports are based on what operators submit, he said. Each operator is required to submit the location report for new wells and has a 30-day window to file a completion report showing its results, according to the Railroad Commission. Rig counts across the state have started to shrink, but he’s seen a spike in the completions reported.
Forbis said he theorizes more completion reports have been submitted as a result of fewer permits being filed.
“The rig count is more indicative of what operators are doing,” Forbis said.
Because companies are not filing for new well permits, he speculates those analysts might have a chance to catch up on the paperwork for completions.
The introduction of improved technology will continue to add to the growing supply of oil and gas in the Eagle Ford Shale, Tunstall said.
Companies are better at collecting the oil and gas out of the shale than they were years ago, he said.
“The cost of production in times likes these, companies will manage cost a lot tighter,” he said. “One hundred dollars a barrel gives them more room to cover costs. At $48 (a barrel), that becomes a lot more important.”
The production of a new well will begin to diminish as soon as it begins to produce. Those depletion rates are fairly significant to a company, and in order to maintain production, it is dependent on completing new wells, Tunstall said.
The growing supply of oil and gas produced in the U.S. may keep the prices low for a while, Forbis said. He expects production to slow down, but he doesn’t know it will happen.
“It will be a while before output drops and we see a response in price,” he said.
The price of a barrel of oil has fallen from about $80 in early November to about $45 in recent days. However, the price surged Monday and closed at $49.57 a barrel.
This article was written by Jessica Rodrigo from Victoria Advocate, Texas and was legally licensed through the NewsCred publisher network.