L48 operators get DUCs in a row as low prices persist


This week's US Upstream Week in Brief investigates a shift in traditional strategic thinking for Lower 48 operators. 2016 could be the Year of the DUC as many companies face the choice of either drawing down or building up their drilled but uncompleted well inventories in response to the low-price market and high cost of drilling new wells. 

In a marked shift in thinking that reflects how 2016 continues to be a transformative year for operator strategies, many operators are opting to draw down their drilled but uncompleted (DUC) well inventories. As companies release guidance in Q1, it's clear that DUCs are starting to play as great a role as new drilling in this year's operations.

DUC strategies differ depending primarily on price assumptions. Operators such as Whiting Petroleum plan on building their DUC inventory to make them more nimble in an oil-price recovery, whereas other companies such as SM Energy are drawing down their DUC inventory.

Whiting has stated that it would consider completing some DUCs should oil prices recover to at least US$40 per barrel (bbl) — a number that comes into play because WTI breakevens for DUCs are one-third lower than those for new wells. Whiting's average Bakken and Three Forks breakeven drops from US$63/bbl to US$45/bbl when comparing the type curve to the DUC breakeven.

To read more about these strategies, read our full Insight report, which takes a deeper look into breakeven analysis and company benchmarking

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You can purchase our full US Upstream Week In Brief on demand to read this week's top stories in the North America Upstream sector, including equity markets funding US$2 billion to finance lower breakeven drilling; implications for Utica and Southwest Marcellus wet gas in light of the Mariner East 2 delay; and whether the oil and gas market has farther to go before bottoming out.

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You can also find our Lower 48 upstream outlook page for videos, reports and updates from our analysts on what to watch for throughout 2016.

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