- “Drill, baby, drill,” said President Trump in his inaugural address on Jan. 20. The slogan first made headlines during the 2008 US Presidential election, when VP candidate Sarah Palin made it a trademark of her campaign speeches.
- Then and now, the slogan has been widely understood as cheerleading for oil and gas, but the US oil patch has dramatically changed since 2008. Drilling activity and the US rig count are no longer reliable indicators of production.?
- In 2024, US onshore oil production and the US rig count actually parted ways as production jumped more than 4% while the rig count dropped, reflecting large efficiency gains.
- Frac counts are now much better than the rig count at forecasting US oil production. In the Permian, we ran regressions to find the best variables for forecasting production: rig counts only score 10%, while frac counts combined with efficiency score 91%.?
- Not only has drilling become more efficient, so too has frac’ing. Longer laterals and “trimul-fracs” that let operators complete three wells at once have dramatically improved frac’ ing efficiency.
- The map of production growth also has changed. The Permian is no longer in the lead. This year is starting with a 30% jump in Eagle Ford completions. Permian completions inched marginally higher, after falling steadily in H2 2024.
- US operators adapted to lower oil prices and focused on profitability by driving innovations to increase fracking efficiency.
- A key innovation was “trimul-frac” - completing 3 wells with a single frac spread.
- This raised the key efficiency metric of “completed lateral per day” to 4200 feet in the Permian, up from 2006 feet in 2023.
- More completed lateral per day means saving costs and bringing wells online sooner.
- Ovintiv also combined this innovation with the use of “e-pumps”.
- We saw a few instances of completing 4 wells with a single spread in 2024 - does anyone have a name for that?
- Once upon a time, the weekly US rig count was market moving, thanks to a close correlation between the number of active rigs in the US oil patch and future production.?
- Over the years that relationship began to fray, for two main reasons. First, drilling innovations (lateral drilling and the steady lengthening of wells) caused a high degree of variability in well productivity.?
- In addition, depending on market conditions, some wells weren’t immediately completed and put on production after being drilled, but instead were added to a variable inventory of “drilled by uncompleted wells” (DUCs).
- Even as the rig count started to move away from production trends, the frac count emerged as a more reliable predictor of supply, as well fracking is more tightly linked to production than drilling.
- Frac counts provide a better estimate of future oil production than rig counts.
- Higher oil prices following the Russian invasion of Ukraine caused frac counts to rise.
- A lower price environment more recently drove investments into operational efficiency by US operators, resulting in a sharp increase in frac feet per day from mid-2023, along with longer well lateral lengths.
- A linear regression of the last 5 years of Permian oil production with rig counts leads to an R-squared of 10%, a metric showing low correlation and ability to predict.
- The same exercise with Permian oil production vs Kayrros active frac count and frac feet per day leads to an R-squared of 91%, showing very high ability to predict.
President Trump declares a national energy emergency (The White House).
On the difficulties of boosting oil & gas production while keeping prices low for US consumers (Reuters).
Oil falls from highs as fears of additional US supply in an oversupplied market offset sanctions and tariffs uncertainty (Reuters).
‘Drill, baby, drill’, explained: Wall Street could be reluctant to fund another drilling binge (FT).
