Does Size Matter?

The U.S. Energy Information Administration (EIA) publishes an analysis of U.S. well data annually, each December. Using data from Enverus, the EIA U.S. Oil and Natural Gas Wells by Production Rate looks at the distribution of wells by size and majority hydrocarbon stream to evaluate changing trends driven by technological innovation in drilling and completions.

The report cover 2000-20222 and provides estimates of production rates for all U.S. oil and gas wells, grouped into BOE/d volume brackets. Wells are split between oil & gas wells using a gas-oil ratio (GOR) of 6,000 cubic feet of natural gas to 1 cubic foot per barrel (cf/b) of oil for each year’s production. Oil wells are considered to have GOR less than or equal to 6,000 cf/b, whereas gas wells have GORs greater than 6,000 cf/b.

Does Size Matter?

In short yes, for U.S. oil and gas production. Both U.S. oil and gas production are at or near record highs. But that has been driven by technological advancements, lateral drilling, longer laterals and drilling of the best acreage among other items. Indeed since the U.S. shale movement began in 2008, the number of active oil wells in the U.S. has only increased 3.4%, while the number of natural gas wells is down 4.5%.

Anyone confused why rig counts and production have lost correlation need look no further than this chart.

Of the 404,000 oil wells in the U.S. as of 2022, 93% produced less than 100 barrels of oil equivalent (BOE) per day, which skews simple averages down, but oil wells have improved significant during the shale era. Average U.S. oil well production rates are up 134% since 2008.

It is the same story with U.S. gas production from gas wells, which have seen average gas production rates increase 74% since 2008. Similar to oil wells, 93% of gas wells produce under 100 BOE/d.

When looking at annual productivity gains - the percent annual increase in average well production - it becomes apparent how U.S. oil production has continued to defy predictions of its imminent slowdown. 2022 saw a material increase in oil productivity after a decline in 2020 and modest increase in 2021.

U.S. natural gas production from gas wells hasn’t seen a reduction in productivity since 2013. Wells just keep getting bigger.

U.S. oil production by the EIA/Enverus dataset brackets is shown below. As the visualization shows, 200 to 1,600 BOE/d wells are driving the oil production increase in the U.S., pushing up the average per well rate.

The U.S. shale era started in earnest in 2008, the increase in U.S. oil well size starting then can clearly be seen in the charts below.

The trends in natural gas production from gas wells even more dramatically highlights the changing size of wells in the U.S.; 1,600 to 12,800 BOE/d gas wells have increased from 5 Bcf per day of gas production in 2013 to over 30 Bcf/d in 2022.

Crossover Production

The EIA/Enverus dataset does a nice job of highlighting the increasing amount of natural gas production from oil wells. We have highlighted previously that U.S. policy makers should take this dynamic into consideration when determining U.S. LNG export policy. 86% of U.S. oil came from what the EIA defines as oil wells in 2022, down from 90% in 2008.

On the gas side things are a little different. 83% of U.S. gas came from gas wells in 2022, down from 94% in 2008. Gas producers in essence lost 11% market share whereas oil producers lost only 4%. Gas prices hovering around $2/Mcf this year highlights the struggles U.S. gas producers have had fighting a battle against low or no cost gas production.

Since 2008, U.S. natural gas production from gas wells is up 63%. Compared that to gas from oil wells, which has increased 385%.

Natural gas production from oil wells was over 18 Bcf/d in 2022, more than quadrupling since 2008.

We thank EIA/Enverus for their work. As the saying goes, a picture can tell a thousand words. U.S. drilling & completion technologies don’t get enough credit for the shale boom. Oil and gas wells continue to get bigger. As long as that continues to be the case, U.S. oil production and thus U.S. significance in global oil markets will continue to increase.