U.S. Energy Information Administration Independent Statistics & Analysis www.eia.gov 

Tight Oil Production Trends in a Low Price 

Environment 

For 

EIA Conference 

June 15, 2015 | Washington, DC 

by 

Grant Nülle, Upstream Oil & Gas Economist 

Office of Petroleum, Natural Gas and Biofuels 
Outline 

• Effects low prices are having on U.S. oil production 

• EIA’s short-term outlook for production 

• Reasons why U.S. output may be more resilient than otherwise thought 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 2 
U.S. oil supply: reasons for reduced output in the short term 

• Oil price decline 

• Reduced operating cash and capital expenditures 

• Falling rig counts 

• Corresponding decline in well completions 

• Global competition, rising world output 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 3 
Year-over-year change 

Source: Evaluate Energy 

4 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Operating cash, capital expenditure, drops among onshore producers 

-60% 

-40% 

-20% 

0% 

20% 

40% 

60% 

80% 

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 

2011 2012 2013 2014 2015 

WTI price 

Capital expenditure 

Cash from operations 
 - 

 500 

 1,000 

 1,500 

 2,000 

 2,500 

Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 

$0 

$20 

$40 

$60 

$80 

$100 

$120 

$140 

$160 

WTI Price 

US Onshore Rig Count 

Rig count Nominal dollars per barrel 

Source: Baker Hughes, Federal Reserve Bank of St. Louis 

5 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Rig count mirrors price drop, lagged by two to four months 
414 

218 

660 

287 255 

124 

1,180 

766 

0 

250 

500 

750 

1,000 

1,250 

Jan Apr Jul Oct Jan Apr 

Eagle Ford 

Permian 

Bakken 

All Others 

2014 2015

Well completions 

Source: EIA estimates 

6 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Reported well completions are falling as rig count dwindles 
-3% 

-2% 

-1% 

0% 

1% 

2% 

3% 

Month1-05 Month1-07 Month1-09 Month1-11 Month1-13 Month1-15 

Percent change from previous month 

Source: US Bureau of Labor Statistics, Current Employment Survey (June 2015) 

7 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

U.S. oil and natural gas production jobs showing month-over-month declines 
Global oil production 

million barrels per day 

Stock change 

million barrels per day 

Source: EIA, Short-Term Energy Outlook, June 2015 

8 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Gap between global oil production and consumption signals increasing 

competitive landscape 

Forecast 

-3 

-2 

-1 

0 

1 

2 

3 

4 

5 

6 

82 

84 

86 

88 

90 

92 

94 

96 

98 

100 

2010-Q4 2011-Q4 2012-Q4 2013-Q4 2014-Q4 2015-Q4 2016-Q4 

Implied stock change and balance (right axis) 

Forecast 

World production (left axis) 
Production Trends & Outlook 

9 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 
Delays of several months between drilling, well completion, production, and 

administrative reporting 

Marked differences in reporting lag and frequency of reports among the states 

Recurring revisions months or years ago 

10 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Data lags complicate understanding of turning points 

Drill a well 

Complete well 

& install 

infrastructure 

Report first 

production to 

the state 

Production 

added to 

state data 

Up to 1 

month 

2 months or more 2 – 4 months 1- 2 months or more 
0% 

10% 

20% 

30% 

40% 

50% 

60% 

70% 

80% 

90% 

100% 

0 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

2000 2002 2004 2006 2008 2010 2012 2014 

Rest of U.S. Oil Production 

Eagle Ford (TX) 

Bakken (MT & ND) 

Spraberry (TX & NM Permian) 

Bonespring (TX & NM Permian) 

Wolfcamp (TX & NM Permian) 

Delaware (TX & NM Permian) 

Yeso-Glorieta (TX & NM Permian) 

Niobrara-Codell (CO, WY) 

Haynesville 

Utica (OH, PA & WV) 

Marcellus 

Woodford (OK) 

Granite Wash (OK & TX) 

Austin Chalk (LA & TX) 

Monterey (CA) 

Tight oil % of total 

U.S. oil production 

million barrels of oil per day 

Tight oil production as a 

percent of total oil production 

Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through April 2015 and represent EIA’s official tight 

oil estimates, but are not survey data. State abbreviations indicate primary state(s). 

11 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Estimated U.S. tight oil production was 4.6 million barrels/day in May 2015 

48% of total U.S. oil production 
 (350) 

 (150) 

 50 

 250 

 450 

Month1-14 Month4-14 Month7-14 Month10-14 Month1-15 Month4-15 Month7-15 

Production from new wells 

Decline from existing wells 

Net change 

Total month-to-month change 

thousand barrels per day 

Source: EIA Drilling Productivity Report, June 2015 

12 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Sum of seven DPR regions show production from new completions beginning 

to trail legacy declines starting in May 2015 
0 

2 

4 

6 

8 

10 

12 

2012 2013 2014 2015 2016 

2014 

2015 2016 

Q1 Q2 Q3 Q4 

Federal GOM 

Alaska 

Lower 48 production from wells 

drilled in 2013 or before 

U.S. monthly crude oil production 

million barrels per day 

Source: EIA, Today in Energy 1/26/2015 http://www.eia.gov/todayinenergy/detail.cfm?id=19711 

13 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

January 2015 STEO had Lower 48 y/y growth in 2015 of 502,000 bbl/d and in 

2016 210,000 bbl/d. 
0 

2 

4 

6 

8 

10 

12 

2012 2013 2014 2015 2016 

2014 

2015 2016 

Q1 Q2 Q3 Q4 

Federal GOM 

Alaska 

Lower 48 production from wells 

drilled in 2013 or before 

U.S. monthly crude oil production 

million barrels per day 

Source: EIA, Short-Term Energy Outlook (STEO) June2015 

14 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

June 2015 STEO shows U.S. Lower 48 y/y growth in 2015 of 720,000 b/d and 

a decrease in 2016 of 160,000 bbl/d. 
Resiliency of U.S. production 

15 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 
U.S. oil supply: reasons for rebound in US output 

• Quality of rig fleet 

• Growth in initial production rates 

• Increase in well completions 

• Falling costs 

• Continued capital availability 

• Ability to compete in global oil market 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 16 
Source: Baker Hughes 

17 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Horizontal rig share rapidly increasing as vertical/directional rigs 

laid down at a faster rate 

Rig Type Running Rigs 

October 2014 

Running Rigs 

May 2015 

% Chg 

Horizontal 1,351 687 - 49% 

Vertical / Directional 574 202 - 65% 

Total 1,925 889 - 54% 
Increasing well productivity will help shore up production numbers 

• Analysis of 85,000 wells drilled from 2012 to 2014 

– By vintage 

– Horizontal, Vertical, Directional wells 

– All U.S. onshore regions 

• Average initial production (IP) rates increasing as the number of 

horizontally-drilled wells increases 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 18 
0 

100 

200 

300 

400 

500 

600 

700 

800 

2012 2013 2014 Vertical Average Horizontal 

Initial production (first full month) 

Barrels per day per well 

Source: EIA analysis of DrillingInfo data 

19 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Permian shows rapid 30-day IP rate increases as share of 

horizontal wells grows from 13% to 33% of wells drilled in 2014 
Barrels per day 

Source: EIA analysis of DrillingInfo data for 2014 wells 

20 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

High IP rates driven by “core” Bakken counties 

Well Count 
Inventory of “drilled but uncompleted” wells may add to production 

• Estimated 2,000 - 4,000 DUC wells in the Lower 48 

– Equivalent to 6-10% of the 40,000 wells in 2014 

– Predominantly located in the Eagle Ford, Bakken, and Permian 

• Depending on actual DUC number and average well productivity thereof, 

hundreds of thousands of barrels per day could come online if all wells 

completed over the next 20 months 

• Stabilization of oil price makes added completions likely 

– As prices have stabilized, there is a much greater incentive for operators to get wells 

completed to generate cash flow 

– 1-year drilling permits may help facilitate Bakken well completions 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 21 
149 167 

660 

880 

0 

200 

400 

600 

800 

Jan Apr Jul Oct Jan 2014 2015 

Well completions 

Uncompleted wells 

Well count 

Source: North Dakota Department of Mineral Resources, EIA Estimates 

22 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Bakken uncompleted well count growing as well completions decline 
 - 

 50 

 100 

 150 

 200 

 250 

 300 

 350 

 400 

 - 

 500 

 1,000 

 1,500 

 2,000 

 2,500 

Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 

Added Production 

Well Completions 

Completed wells

Added production 

thousand barrels per day 

23 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Potential scenario of well completions and added production 
80 

90 

100 

110 

120 

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr 

Drilling Oil & Gas Wells 

Support Activities 

Frac Sand 

2013 2014 2015

Index Jan. 2013 = 100 

Source: U.S. Bureau of Labor Statistics, June 2015 

24 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Oil industry supplier cost reductions beginning to manifest in producer price 

indices Cost Index Oct. 2014 May 2015 % Chg 

Frac Sand 102.2 87.6 - 14.3% 

Drilling 113.9 93.1 - 18.3% 

Support 100.8 99.5 - 1.3% 
-0.90 

-0.60 

-0.30 

0.00 

0.30 

0.60 

0.90 

-15 

-10 

-5 

0 

5 

10 

15 

Free cash flow 

(left axis) 

Net share 

issuance plus net 

change in debt 

(left axis) 

Net hedging 

assets (left axis) 

Long-term debt 

to equity (right 

axis) 

Cash-on-hand to 

short-term 

liabilities (right 

axis) 

Select financial measures for 38 U.S. onshore producers 

2013 Q1 

2014 Q1 

2015 Q1 

Billion dollars Ratio 

Source: Evaluate Energy 

25 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Onshore producers have not had problems raising cash, but still have a high 

stock of debt 
Dollars per barrel of oil equivalent 

Source: Evaluate Energy, EIA Analysis 

26 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

U.S. onshore companies are competitive on costs 

$0 

$5 

$10 

$15 

$20 

$25 

$30 

5-yr avg Finding & Development 

cost 

5-yr avg Production cost 

U.S. onshore 

Global majors 
Summary 

• Low oil prices are adversely affecting the U.S. onshore oil sector 

• EIA’s short-term production outlook anticipates decline in tight oil production 

• Rig quality, well productivity improvements, and falling costs will help U.S. oil 

sector be more resilient amid period of low prices than otherwise thought 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 27 
For more information 

• U.S. Energy Information Administration home page | www.eia.gov

• Annual Energy Outlook | www.eia.gov/forecasts/aeo

• Short-Term Energy Outlook | www.eia.gov/forecasts/steo

• International Energy Outlook | www.eia.gov/forecasts/ieo

• Today In Energy | www.eia.gov/todayinenergy

• Monthly Energy Review | www.eia.gov/totalenergy/data/monthly

• State Energy Portal | www.eia.gov/state 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 28 
Supplemental slides 

29 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 
0% 

10% 

20% 

30% 

40% 

50% 

60% 

70% 

80% 

90% 

100% 

1995 2000 2005 2010 2015 

Vertical 

Horizontal/Directional 

Percent of total running rigs 

Source: Baker Hughes 

30 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Horizontal/Directional rig share rapidly increasing as vertical rigs laid down 
 - 

 100 

 200 

 300 

 400 

 500 

 600 

 700 

 800 

 900 

2012 2013 2014 Vertical Average Horizontal 

Barrels/day 

Source: EIA Estimates, DrillingInfo Data 

31 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Eagle Ford shows slower 30-day IP growth as share of horizontal wells 

annually comprise 9 of every 10 wells drilled 
 - 

 100 

 200 

 300 

 400 

 500 

 600 

 700 

2012 2013 2014 Vertical Average Horizontal 

Barrels/day 

Source: EIA Estimates, DrillingInfo Data 

32 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

All other regions shows steady IP increases as share of horizontal wells grows 

from 34% in 2012 to 42% of wells drilled in 2014 
 - 

 200 

 400 

 600 

 800 

 1,000 

2012 2013 2014 Vertical Average Horizontal 

Barrels/day 

Source: EIA Estimates, DrillingInfo Data 

33 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Virtually all wells in Bakken are horizontally drilled, with average 30-day IP 

rate more than doubling since 2012 
Barrels per day 

Source: EIA Estimates, DrillingInfo Data 

34 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Eagle Ford IP rates indicate greater heterogeneity across counties 

Well Count Barrels/day 
2014 

4,248 Total Wells 

1) SPUD Only 

2) COMP Only 

3) PRODUCING 

26% 

1,122 

21% 

887 

53% 

2,239 

2013 

3,706 Total Wells 

1) SPUD Only 

2) COMP Only 

3) PRODUCING 

62% 

2,305 

24% 

875 

14% 

526 

35 

Analysis of Eagle Ford well activity shows increasing proportion of wells 

drilled or completed but yet to produce 

Source: DrillingInfo April 2014 and 2015 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 
0 

200 

400 

600 

800 

1,000 

1,200 Bloomberg High Yield Corporate Bond Index 

Energy 

Materials 

Industrials 

Option adjusted spread (bps) 

Source: Bloomberg 

36 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 

Risk premiums have declined since crude prices stabilized, but remain higher 

than other sectors 
Contributing Factors to U.S. Tight Oil Production 

• Technical expertise and experience 

• Extensive transportation capacity 

• Price responsiveness of producers 

• Availability of capital 

• Regulatory stability 

• Learning-by-doing efficiencies gained by drilling thousands of tight oil wells 

Nülle | U.S. Tight Oil Trends, 

June 15, 2015 37