Tuesday, February 11, 2014

Why Oil and Gas Activity in Texas is Greater than Reported

Texas has about as much oil and gas activity as the rest of the lower 48 combined.  They are busy.  And it seems that production comes first, with reporting a distant second.  This manifests in a couple of obvious ways.  First, operators report production to the Texas Railroad Commission late.  And since the RRC doesn't extrapolate or estimate the missing volumes, it always appears that production is declining in the recent periods.  But it always rises over time until the reported volumes closely match the EIA reported quantities, as the late production reports come in.  It is important to understand the magnitude of the missing volumes and the extent of the lag time.  Basically the production volumes are not accurate until a year has transpired, and the most recent months seriously under report actual production.  Here is the comparison:  The EIA Reported (Estimated) volumes, and those reported by the RRC (retrieved on 2/8/14).  They differ in the most recently reported period by over 700K BOPD.  So often these volumes are reported in the media as if they were final and accurate.

Secondly, well completions are often reported late when things are busy.  Today the January 2014 Drilling, Completion, and Permitting report was released by the RRC, and it shows a huge catch-up in reporting completions (particularly oil completions).  Most of the late reporting was in Zone 8 (West Texas):