Friday, November 11, 2016

Texas Oil and Gas Drilling and Completion Report Shows Increase in Drilling Permits

The Texas Railroad Commission Monthly Drilling, Completion and Plugging Summaries showed a third month of increasing permit activity in October, though reported well completions remained at a depressed level.  The recent increase in rig counts should translate into rising completions by year end (though completions are often reported late).  

Though most wells produce both oil and gas, they are reported as one or the other, and the large majority of reported completions are oil wells.  Oil well completions have been declining steadily since early 2015, and were flat month-on-month in October.  They are down by about 75% from activity levels in early 2015, so liquids production should reflect that in the near term.

Meanwhile, the same well completion data tracks closely with the EIA reported oil output (million barrels per month), without much lag time.

Gas activity is much lower, with uneven monthly data indicating flat activity levels in the 100-200 wells per month range.  Strength in the forward strip this fall did see rigs added to the fleet, but production impact isn't likely to be substantial, especially in the face of falling associated gas production.