by Deon Daugherty, Senior Editor
Asking R.T. Dukes why oil companies are finishing up their drilled, but uncompleted (DUC) wells – bringing even more oil to weigh down an oversupplied market – his answer is simple: business is competitive.
“If this were a monopoly, they probably wouldn’t complete them, but the fact is they’ve got competitors across the globe and across the country. They’ve already spent the money to begin the well,” Dukes, research director at Wood Mackenzie, told Rigzone. “They’re in the business of producing oil. If they wanted to leave it in the ground and be a storage company, they’d have a different business model.”
Numbering DUCs in the thousands may be a distortion of the true count. DUCs may occur naturally as part of the development of a single pad, which services multiple wells.
So they’re a natural inventory for various plays, he said. Looking at the hard number of wells intentionally placed in the DUC stage is between 700 and 800.
Completing those wells will probably spill over into next year, but WoodMac doesn’t believe that when they’re at peak production – estimated between 250,000 to 350,000 per day – and it won’t be enough to move the market.
To get started, it would take between three and four months for the inventory to come online, Dukes said. What’s more, completing the well is also where companies spend roughly 75 percent of the cost per well. So that could be a significant blow to CAPEX.
Dukes noted that production was occurring at record levels, and along with the price of oil, dropped hard. Once production resumes, there’s something of a backlog because it takes time for crews and equipment to return to the site.
But it won’t happen overnight.
“These aren’t switches you just flip,” he said. “You’ve got logistics and pumps, and completion crews. There’s a natural delay [that happens] as you begin a drill pad. When there’s a lot of moving parts that can change, you’ve got to have contingencies.”