With oil around $50 a barrel, everyone in the market is talking about DUCs, says the FT’s Ed Crooks: “Drilled but Uncompleted” shale wells. During the shale boom, many producers didn’t finish all their wells, and there are now signs that they are returning to them in order to cash in on higher prices. Some think the “fracklog” could release enough supply to cap the rally in oil prices.
Establishing quite how many there are, however, is easier said than done: it’s hard to pinpoint the difference between a well that has been deliberately delayed and one that has just taken a long time to complete. Rystad Energy, a consultancy, reckons there are around 2,000. Analysts agree, however, that they are unlikely to be able to produce more than 300,000 barrels per day, or around 4% of onshore production.
The best guess, then, is that DUCs can “slow the decline in US oil output… [but] cannot prevent it”, says Crooks. That would require a recovery in exploration, which may be beginning now but will take some time: the number of drilling rigs being used is ticking up but has only just regained its April level.