The agility of US tight oil

Which US Lower 48 operators have the largest, low-cost tight oil inventory? Throughout the US Lower 48, unconventional development has been the most reactive to the oil price collapse, with operators nimbly halting drilling plans and scaling back activity to balance the books.

Looking across the Bakken, the Eagle Ford and the Permian, we've seen different strategic approaches to these cuts.

While most operators across the major tight oil plays high-graded to the core, focusing the majority of spend on the more prolific and economic areas, operators in the Bakken withdrew the most rigs and stopped development in hundreds of wells – so much so, that the Bakken is now home to more drilled but uncompleted wells (DUCs) than any other play in the US Lower 48.

These DUC inventories are critical to forecasting production volumes and are responsible for a slower production and supply reponse relative to the rig count, as rigs are no longer fully indicative of how many wells will be brought online. These DUCs provide cash flow to these operators, enabling them to focus on completions at will once rig commitments expire.

The Permian, after a decade in the shadows of the Bakken and the Eagle Ford, is showing more promise in the US tight oil space due to its substantial drilling inventory of stacked pay and low breakeven resource.

Compared to our global view in 2014, we now expect 7 billion boe less will be produced from 2016 to 2020, with the US Lower 48 accounting for more than 70% of those volumes in the near-term, through 2017. The agility that brought costs and breakevens down will slowly resurrect them again, with dormant inventories coming online and getting back on track to profitability.