WSJ: Goes After Shale Again

Back in March, the Wall Street Journal wrote a take down article on shale production. The newspaper is at it again with a very similar article. The prior article mentioned that shale producers argued that they could drill wells closer together and still produce the same amount of oil per well. This resulted in corporations raising close to $57 billion in equity and debt in 2016. The article discussed how one such corporation, Laredo, promised that they could drill 32 wells on a unit, which has since been reduced to 16 to 24 wells.

For their most recent article, the WSJ goes after Encana.

To reduce costs and avoid production problems that can occur when single shale wells are spaced too closely together, the company introduced the cube, an experiment in which it would complete as many as 60 oil and natural-gas wells from one location . . . In the company's biggest cube development to date, 33 wells drilled from one location in West Texas are each on track to pump about 300,000 barrels of oil over 30 years. That is about half the amount of oil Encana said a typical well would pump in late 2017, according to the Journal's analysis of production data from Rystad Energy, Shale Profile and Friezo Loughrey Oil Well Partners LLC. 



The article states that at this cube the wells were spaced at 330-feet apart. They are now looking to space wells at 500-feet apart. The prior article stated that wells are drilled between 275 to 600 feet from each other. So Encana is definitely shifted their wells closer to the out range now. They are also adjusting how many wells are producing at a time. Currently the number is 10 or 12 wells versus the old target of 40 to 50 wells.

Encana's stock price (ECA) has dropped from a 52-week high of around $14 to around $5.

Just a couple oil data points (not part of the article):

One measurement that I've been keeping track of is DUCs (drilled but uncompleted wells). Since December 2017, DUCs have increased from 7,493 to 8,283 (May 2019). However, a top of 8,798 was reached in January.

As for Baker Hughes rig count, rigs topped out in November 2018 at 888. The rig count as of mid-July 2019 was 784. Last July, the rig count was 861.

If I can make a venture, it looks like shale producers are cutting back on their capital expenditures (rig counts) and are instead keeping their production going via reductions in DUCs.