DUC wells present in every major basin, but 70% of “old” DUC wells located in two basins
Drilled but uncompleted (DUC) wells represent more than 250,000 b/d of additional crude supply and 4.0 Bcfd of natural gas supply that could come into the market as prices begin to recover, according to Wood Mackenzie.
Based on information from it’s proprietary North American Well Analysis Tool, Wood Mackenzie has estimated and tracked DUC wells throughout the US Lower 48.
When oil prices plummeted in late 2014 and 2015, the number of DUC wells rose dramatically.
Because they held long-term rig contracts put in place while prices were above US$90/bbl, US onshore operators chose to continue drilling wells — to avoid the high cancellation fees — but delay well completion and production.
As commodity prices continued to fall, DUC wells became more common as operators chose not to recover oil or gas until prices improved, according to Wood Mackenzie.
While operators have drawn down the DUC backlog from its peak in 2014, there are still more than 2,000 wells across the country that remain uncompleted, representing over 250,000 b/d of additional crude supply and 4.0 bcfd of natural gas supply that could come into the market as prices begin to recover.
Because the drilling costs are effectively “sunk,” the breakeven economics can be approximately 30 per cent lower — crude prices or gas prices don’t need to appreciate much more than US$50/bbl or US$2.50/mmbtu — than for new drill opportunities.
As conditions improve over the next 18 months, Wood Mackenzie expects to see operators moving back into the major oil and gas plays to begin production.
In particular, we anticipate activity focusing on two key plays for crude and natural gas production from DUC wells.
Wood Mackenzie does not expect the majority of these old DUC wells to ever be completed.