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Permian Basin 2018

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PERMIAN BASIN: MIDSTREAM 66 | October 2018 | hartenergy.com T he Permian Basin's inventory of drilled but uncompleted (DUC) wells continues to swell amid increased drilling activity as operators work their way through cycle times. But infrastructure bottlenecks in one of the world's most active basins are playing a role in the rising number of "abnormal" DUCs, or wells that remain uncompleted longer than the typical four to seven months it usually takes an operator to complete a well, according to Artem Abramov, vice president of shale analysis for Rystad Energy. The time frame depends on the operator's strategy and maturity of development, he added. The growing counts come as some E&Ps gear up to increase spending and activity, eyeing improved market conditions. More efficient drilling rigs, pad drilling and fine-tuned completion recipes among other techniques and technology have sent produc- tion from the biggest U.S. shale play soaring. Takeaway capacity has been unable to keep pace. "Since first-quarter 2018 we started observing somewhat abnormal DUC buildup in the Permian Basin," Abramov told Hart Energy. "Some of these delayed completions (especially for small private operators and new entrants) are clearly related to severe pipeline bottlenecks. Essentially, smaller companies rarely have any firm commitment in pipelines and are fully exposed to Midland spot pricing, which degraded severely." Data from Rystad Energy ShaleWellCube show the number of abnormal DUCs has risen from 99, or 7% of the Permian's total DUC count, in January 2017 to 235 in January 2018. The latter represents about 9% of the basin's total DUC count. The figure inched down in March to 228. "It is no longer economically rational to com- plete some of these wells especially in the non- core parts of the basin as initial well economics assessment was made under more favorable price strips," he said. "Meanwhile, pressure pumping capacity is no longer a bottleneck. In fact, service providers deployed too many new frack spreads over 1H18, whereas demand for pumping service flattened out somewhat." Rising Statistics from the U.S. Energy Information Admin- istration's (EIA) drilling productivity report released Aug. 14 show the number of total DUCs in the Perm- ian Basin jumped to 3,470 in July, compared to 2,621 in January 2018 and 1,423 in January 2017. The number of wells drilled during that time also increased, moving from 363 in January 2017 to 510 a year later and to 601 in July. But as the EIA explained, "there will always be some DUCs" given the time needed to plan and schedule completion jobs. "When drilling activity grows it's just nor- mal for the DUC inventories to grow propor- tionately," Abramov said, noting the bulk of the rising DUC count is associated with growing activity in the basin. Bringing down the DUC count is on some oper- ators' minds. The topic surfaced briefly on Pioneer Natural Resources Co.'s second-quarter 2018 earn- ings call Aug. 8. The company announced it plans Infrastructure bottlenecks are impacting completion times. DUC and Abnormal DUC Counts Rise in Permian By Velda Addison Senior Editor, Digital News Group, Hart Energy

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