After U.S. crude production fell by 60,000 barrels per day (bbl/d) in November, the Department of Energy estimates an even steeper decline with the Eagle Ford Shale hardest hit.
The U.S. Energy Information Administration (EIA) forecasts a 116 Mbbl/d drop in U.S. shale production by January with only the Permian showing any significant increase (14 Mbbl/d). On its own, the Eagle Ford makes up 66% of the Lower 48 production slump with a decline of 77 Mbbl/d.
Production will continue to wane through the third quarter of 2015, the EIA said Dec. 8, before growth resumes late in 2016.
The agency projects 2015 production will average 8.8 MMbbl/d in 2016 compared to 9.3 MMbbl/d in 2015.
In November, total U.S. crude oil production declined by about 60 Mbbl/d compared with October, a miss of the EIA forecast, which stated that volumes would shrink by 80 Mbbl/d.
Pearce Hammond, analyst, Simmons & Co. International, noted that the two most recent EIA forecasts have overstated actual declines.
Along with the Eagle Ford, the Bakken and Niobrara are expected to see steep production declines through January 2016, Hammond said.
“The Permian is expected to be up 144 Mbbl/d during that period,” he said.
Along with other shales, the Eagle Ford is showing weakness in permitting and rig counts.
In November, Eagle Ford well permits submitted to the Texas Railroad Commission fell 62%, to 206.
Since its peak in October 2014, Eagle Ford permitting has plunged 77%, said Walt Chancellor, analyst, Macquarie Research.
The regions covered by EIA’s forecast produced a high point of 5.48 MMbbl/d in March. The agency estimates a decline of 622 Mbbl/d by January 2016, Hammond said.
“It is important to keep in mind that the forecasted regions do not include Gulf of Mexico,” he said.
The most productive plays — the Permian, Eagle Ford and Bakken — have each seen their total rig counts devastated since 2014. The three drilling areas make up 71% of the overall U.S. rig decline, according to Baker Hughes Inc. (BHI) data.
As of Dec. 4, the Eagle Ford’s rig count held steady at 73—down 133 rigs compared to December 2014.
In November and again on Dec. 7, the EIA said that oil production per rig would fall in the Bakken, Eagle Ford and Permian.
“However, the oil production per rig is still up meaningfully since the beginning of this year,” Hammond said.
Nevertheless, from March 2015 to January 2016, the EIA expects the steepest production declines in the Eagle Ford, with volumes falling 510 Mbbl/d.
EIA also predicted that Brent crude oil prices averaging $53/bbl in 2015 and $56/bbl in 2016. West Texas Intermediate (WTI) crude oil prices will average about $4/bbl lower than the Brent in 2015 and are expected to be $5/bbl lower in 2016.
“The current values of futures and options contracts for March 2016 delivery suggest the market expects WTI prices to range from $30/bbl to $63/bbl at the 95% confidence interval,” the EIA said.
In November 2014, Bob Brackett, senior analyst, Bernstein Research, wrote that average Eagle Ford programs were robust at $80/bbl of WTI but that the bottom quartile of wells was uneconomic even at $100/bbl.
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