Permian wells continue to be among the nation’s most productive

The Permian region, which spans western Texas and eastern New Mexico, has led all U.S. oil basins in oil production per well since 2021, when the measure surpassed the wells in the Bakken region in North Dakota. In the first eight months of 2023, initial production per new well averaged 847 barrels per day (b/d) per well, an increase of over 750 b/d since 2007 (Figure 1). Sustained well productivity improvements in the Permian have allowed oil production to grow despite the least number of rigs currently operating in the region since January 2022.

Because well production naturally declines over time, we use a well’s initial production (IP)—the average daily oil production in the well’s first full month production to assess its productivity. IP growth in the Permian region—which accounts for around 45% of U.S. oil production—was a key driver of U.S. crude oil production reaching an all-time high in August 2023.

Although IP trended towards consistent growth in all major oil basins until 2019, the Permian and Anadarko regions are the only regions whose IP rate is greater today than it was in 2019. IP for wells in the Permian region is up 8% (63 b/d) in the first eight months of 2023 compared with all of 2019. All other DPR regions saw declines in IP of as much as 5% compared with 2019.

While IP rates are higher in the Permian, data suggests wells in the region decline faster than those in the Bakken region over the first six months. IP rate is a key metric for assessing the quality of a well and the potential of a reservoir. A high IP rate indicates that a well can produce a lot of oil in its early life. The 180-day production (P180) adds a complimentary metric for assessing the potential of a well beyond the first month because it considers how decline rates could impact overall production. The P180 is the cumulative oil production of a well in its first 180 days of production. Figure 2 displays P180 for each region with oil wells drilled by vintage year.

Of the five oil-producing regions analyzed in our Drilling Productivity Report (DPR), only the Niobrara reported P180 in 2023 as the highest on record since 2019. Three of the five regions had record-high P180s in 2021 and have since declined. Regions with less variation in P180 between years indicates smaller production variation. Regions with greater variation in P180 vintage years indicates technology advances, economic factors, or possible disruptions. Technological advances include drilling longer laterals, having a more efficient completion strategy and increasing the number of horizontal wells on well sites (well pad). A disruption could be caused by well maintenance, delays due to severe weather, or a midstream infrastructure outage.

The rig count is a key indicator of oil and natural gas drilling activity. The Permian region rig count peaked in April 2023 at 356 (Figure 3); the sum of the rigs in other DPR regions peaked at a combined 347 in December 2022. Since then, the rig counts for each region have trended downward and have largely maintained the same level of counts relative to each other, except for the Anadarko region rig count, which fell below the Appalachia region in June 2023.

We forecast production will decline this November across the DPR regions because of a continuing decline in the rig count during October (Figure 4). The DPR regions had 549 active rigs in October, 8 fewer than September. Of the eight-rig decline, seven were in the Permian region, the most active drilling region in the United States.

As the rig count declines, producers may be able to maintain production or produce more oil with fewer rigs through technological advances or other operational efficiencies that boost output per well. For example, the use of artificial intelligence (AI) to predict downtime has reduced the time to drill a well. Well profiles such as extended reach wells and complex well profiles allow producers to increase production per well.

Our November Short-Term Energy Outlook (STEO), which includes forecasts through 2024 and considers other factors such as weather and prices, was published on November 7.The STEO forecasts the West Texas Intermediate (WTI) crude oil price to average $86 per barrel (b) in the fourth quarter of 2023 and average $89/b in 2024. Since the STEO release on November 7, crude oil prices have fallen below $80/b. If these lower prices persist or continue to fall, we are likely to see less U.S. crude oil production than we forecast in the November STEO.

We also plan to publish a supplement looking at scenarios of U.S. production if prices are appreciably higher or lower this month.

For questions about This Week in Petroleum, contact the Petroleum and Liquid Fuels Markets Team at 202-586-5840.