Pump jacks dot the landscape outside Midland, a West Texas oil town. (Ilana Panich-Linsman for NPR)
By Caroline Halter
To predict production levels in the Permian Basin, energy analysts often look at the number of rigs in the area. It’s a simple formula: when rig count goes up, they expect output to follow. But, a number of analysts are starting to factor output with total rigs and something called the DUC count.
DUC stands for “drilled, uncompleted.”
These are wells that still need to be cased, cemented, perforated, and fracked before they can produce oil or gas. Between these stages, from when a well is drilled to when it’s actually brought onto production, there’s always been a delay, says Todd Bush, the founder of Energent Group. His company collects and analyzes data on oil and gas, including the DUC count, which has been steadily rising over the last year.
The latest numbers from the EIA, which began including DUC count in their monthly reports last year, show uncompleted wells in the Permian Basin at an all time high, with the total rising to 2,244 in June, reflecting a 130 jump in one month.
“You can actually look back in the rise of horizontal rigs over that same period of time, and draw a little bit of a relationship between the number of rigs in the Permian and the increase in the number of uncompleted wells,” explained Bush.
Technologies – like horizontal drilling – allow companies to get more out of a single well, increasing efficiency. This tech is becoming increasingly important due to a shortage of pressure pumpers, the companies that prepare wells for production. During the 2014-2016 downturn in global oil prices, these companies were forced to downsize and it’s still too expensive for them to reactivate new frack crews and equipment.
So what does it mean for analysts when rig count and production are increasing, alongside a growing number of uncompleted wells? Does it make rig count a less reliable indicator for production?
“I think rig count will always be an indicator,” said Bush. “I think the uncompleted wells and the DUC count, if you will, will give the industry another barometer of how fast companies are able to bring wells online.”
Rig count isn’t going anywhere anytime soon. But, this new data point is helping analysts – like Bush – paint a fuller picture of what’s going on in an industry that’s undergone significant change.