US shale companies produce more crude using fewer rigs By Reuters

By Arathy Somasekhar

HOUSTON (Reuters) – Greater operational efficiency in top U.S. shale is squeezing more oil without higher spending, according to the latest production figures, which will boost global oil supply as OPEC also plans to -reverse its production cuts later in the year. .

Producers are extending their wells up to three miles, squeezing more wells onto a single rig and fracking more wells at once, boosting output, according to industry experts and company executives on recent earnings calls.

Taken together, these efficiency gains have led several major producers to raise their full-year shale oil production targets. Chevron (NYSE: ) raised its full-year Permian production target to a roughly 15% gain, up from a previous forecast of a 10% gain.

Diamondback (NASDAQ:), APA Corp, Devon Energy (NYSE: ) and Permian Resources, also forecast higher-than-expected Permian shale production in the coming months. Occidental Petroleum (NYSE: ) raised its 2024 basin outlook by 1,000 barrels per day (bpd), excluding the Permian-focused CrownRock acquisition.

Devon pointed to a 12% increase in drilling efficiency this year from drilling and said it has improved 6% in feet per well completion day to date, pushing full-year oil production up about 3 %. Permian Resources raised its oil production target by 1.5% this year.

“Ultimately, we see a market that will end up being oversupplied in the fourth quarter,” said Walt Chancellor, energy strategist at banking and finance firm Macquarie Group ( OTC: ).

Macquarie expects US output to rise by about 500,000 barrels per day (bpd) by the end of this year from the end of last year, beating US government estimates calling for an increase of about 300,000 barrels per day.

“For OPEC, what this means is that ultimately we see them not being able to execute the current plan to bring production back over 12 months,” the chancellor said.

NO post-merger slowdown

Consolidation among U.S. shale producers was expected to slow output growth this year as companies preoccupied with combining staff and sorting out new properties. But the benefits of being able to extend wells into adjacent areas have increased productivity.

“Efficiency-driven public operators are increasingly drilling longer laterals and squeezing more wells onto the rig,” said Ryan Hill, an analyst at energy data firm Enverus.

Diamondback, which agreed this year to acquire Endeavor Energy Resources, said last week it models one rig will drill at least 26 wells a year, up from earlier expectations of 24 wells, adding that it is drilling wells with about 10% faster than at the beginning of the year.

Diamondback will be stingy with any divestitures in the Permian because producing wells “like are worth their weight in gold right now,” said Kaes Van’t Hof, Diamondback Energy’s chief financial officer.

Chevron said it was one of the first to implement triple-fracking technology, which fractures three wells in rapid succession, cutting costs by more than 10 percent and shortening completion time by 25 percent. This helped increase the number of production days, Chevron said.

Total Permian production rose to 6.2 million barrels per day in June, the second-highest level on record, according to US government data. New well production per rig rose to 1,400 barrels per day, the highest in two and a half years.

Historically, U.S. oil production has topped estimates every year since 2009 except 2020, when the COVID-19 pandemic crushed demand and production, an analysis of U.S. data showed.

The decline in installations has prevented production from growing even faster, and this will eventually slow the rate of growth. The number of horizontal oil rigs working in the Permian fell 20 to 295 in the past week, according to data from Enverus. It’s down 100 over the past five years.