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Tuesday, January 12, 2016

Bloomberg: Drillers Can Pump Oil at Low Cost from "Mothballed Wells"

From Bloomberg:
U.S. shale explorers will be able to bring new supply to market this year even with most of the rig fleet idled and drilling budgets cut to the bone. Their secret: thousands of mothballed wells. 
Companies from Exxon Mobil Corp. to EOG Resources Inc. have 3,994 wells drilled between Jan. 1, 2014, and Aug. 31 with active permits that had not been completed as of Dec. 18, according to William Foiles and Andrew Cosgrove, analysts at Bloomberg Intelligence
The fracklog, as the cache of suspended wells stretching from south Texas to the Rocky Mountains is known, is growing as the worst crude-market downturn in a generation spurred them to halt projects early to conserve cash. Global oil markets are in turmoil amid a market-share war between OPEC and American shale explorers that has created a flood of excess supply and slashed the value of crude by two-thirds in the past 18 months.

Finishing the wells means significantly higher spending efficiency for these companies because they won’t have to put new holes in the ground to add to output, Cosgrove said in a telephone interview. “Costs for the drilling portion are essentially sunk.”
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