DUC and recover: the backlog of L48 uncompleted wells


Drilled but uncompleted (DUC) wells represent more than 250,000 bbl/d of additional crude supply and 4.0 bcfd of natural gas supply that could come into the market as prices begin to recover. Based on information from our proprietary North America Well Analysis Tool, we've explored, 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.

Hear the implications directly from our analysts in our latest Crude for Thought podcast.

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.

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Because the drilling costs are effectively "sunk," the breakeven economics can be approximately 30% 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, we expect to see operators moving back in to 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.

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DUC wells are present in every major basin, but 70% of "old" DUC wells — uncompleted wells that were drilled more than two years ago — are located in just two plays. Most of these wells were drilled when oil prices were still high and remained uncompleted for any number of reasons besides oil or gas prices. We do not expect the majority of these old DUC wells to ever be completed.

This report is the first instalment in our series on DUC wells and focuses on where the DUCs are located, how the backlog has trended historically and how DUC economics compare to new drill breakevens. The next instalment will explore the operators with the largest inventory of DUCs.

Get the full report on-demand

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DUC and recover: a play-level look at the L48 uncompleted well backlog


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