Shale frackers face uphill battle with increasing well declines

The explosive expansion of American shale oil production is becoming unsustainable for North American companies from Texas to North Dakota.

"They will have to invest more in order to grow," Julie Francis, principal analyst at Wood Mackenzie, told the Wall Street Journal this week.

But this year, investors have developed a growing air of caution when pouring money into shale exploration and production companies. Francis likened the situation to trying to fill a leaky cup. After front-loading new wells to produce the highest volumes right out of the gate, the wells tend to peak too early.

Today, natural gas output is growing faster than oil. This is problematic for producers who are targeting oil output, which is priced higher and generates better returns. Tight spacing between parent and child wells is part of the problem.

Since 2017, we've held the view that tight spacing between parent and child wells is causing performance degradation for shale producers. The most preventive measure for interference is simple: increasing spacing between parent and child wells. This move distances the child well from the pressure-depleted, gassy volume of rock near the parent well.

As shale operators eye new solutions, Wood Mackenzie is adding new analytics tools that help producers capture the strongest values. We are releasing new subsurface layers within our suite of Well Evaluator services.