Eagle Ford Shale Decline Rate Shoots Up A Stunning 10% In One Month

The U.S. and Global financial system is being kept alive by a highly leveraged paper system.  The Fed’s recent announcement of a $10 billion taper has had the anticipated impact on the precious metals and bond market.

Even though I thought the Fed would never taper, the end result will be the same.  As I have mentioned several times, Energy drives the markets… not Finance.  The so-called U.S. Shale Revolution is the only thing that is holding off the collapse of the global markets as it has brought on more oil supply (only temporarily), desperately needed by the world.

Unfortunately, it looks like the “Illusion of Sustainability” in shale oil production took a BIG HIT, as the forecasted decline rate at the Eagle Ford Shale Field increased double-digits in just one month.

Eagle Ford Dec 2013 Decline

Eagle Ford Jan 2014 Decline

According to the EIA – U.S. Energy Information Agency, the daily decline rate in the Eagle Ford Shale Oil Field is forecasted to decline from 83,000 bd (barrels a day) in Dec 2013, to 91,000 bd in Jan 2014.  This is an (10%) 8,000 bd decline in just one month.

If we look at the two next charts we can see the change in Net Oil Production from the Eagle Ford:

Eagle Ford Dec 2013 Net Production

Eagle Ford Jan 2014 Net Production

In the first graph, the companies drilling in the Eagle Ford added 116,000 bd of new production in Dec and if you subtract the daily decline rate of 83,000 bd, there was a net new amount for the month of 33,000 bd of production.

Even though these companies are forecasted to bring on 120,000 bd of new production in Jan 2014, their daily decline rate has increased to 91,000 bd, which gives the Eagle Ford a net new production for Jan at 29,000 bd — down 4,000 bd compared to the previous month even though production increased by 4,000 bd.

What we have here is a classic example of the DEATH OF OIL PRODUCTION by an ever-increasing decline rate.  As I noted in a previous article, the Eagle Ford has been averaging a 24,000 bd decline rate a year for the past 3 years.   However, it has increased 8,000 bd in just one month!

If we go back to the first month the EIA stated these statistics, Nov 2013, we can see the overall impact:

Eagle Ford Nov 2013 Decline

Eagle Ford Nov 2013 Net Production

Here we can see that in Nov 2013, the daily decline rate at the Eagle Ford was only 81,000 bd.  New production during Nov 2013 was 105,000 bd and minus the 81,000 bd of declines, we had a net production of 24,000 bd for the month.

If the companies in the Eagle Ford produced the same 105,000 bd in Jan as they did in Nov, they would have only had a net production of 14,000 bd.  But as we can see, they were able to ramp up new production in Jan to 120,000 bd to get that net amount of 29,000 bd.

The daily decline rate will continue to increase and it looks like it will surpass the 107,000 bd three-year average trend by the end of 2014 by a far margin.  If the Eagle Ford hits a decline rate of 115,000-120,000 by the end of 2014, it will have to produce a great deal more if it wants to continue to add net new production.

At some point in time, the “Drilling Treadmill” will not be able to keep up with the huge declines and production at the Eagle Ford & Bakken.

The United States has no PLAN B after the Great Shale Hype Peaks and declines.

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3 Comments on "Eagle Ford Shale Decline Rate Shoots Up A Stunning 10% In One Month"

  1. THE FRACKING PONZI SCHEME

    Robert Ayres, a scientist and professor at the Paris-based INSEAD business school, wrote recently that a “mini-bubble” is being inflated by shale gas enthusiasts. “Drilling for oil in the U.S. in 2012 was at the rate of 25,000 new wells per year, just to keep output at the same level as it was in the year 2000, when only 5,000 wells were drilled.” http://www.forbes.com/sites/insead/2013/05/08/shale-oil-and-gas-the-contrarian-view/

    Would this not be akin to dropping tens of thousands of rigs onto the biggest saudi field — and sucking that dry in 5 years? Ya sure you get a big surge but it’s short lived

    And of course shale oil is the dregs left from conventional extraction so it peaks far more quickly.

    This will end soon – and badly

  2. US tight Oil is going to peak approximately 2016 (If the Financial System is not imploding).

    http://peakoilbarrel.com/when-wil-us-light-tight-oil-lto-peak/

    That should be the last possible date silver price beginning its tremendous rise.

    I survived the last 2 years of falling silver prices and if the worst case (what I absolutely don’t believe) should happen, to years sideways in silver price I will survive also.

    Silver will be one solution for an individual to not failing in absolute poverty I believe.

  3. Steve,

    the inter-connectivity or confluence of peak exportable cheap energy, peak printing and indebtedness, bottoming available physical PM’s corresponding to bottoming prices in these metals…the de-emphasis of the petro-dollar exactly when the Fed is “tapering”, Congress is de-sequestering (raising deficit spending) and the US needs “foreigners” to suck up more US dollars and US Treasury’s while they need /want fewer and fewer. Each is a universe to itself…but these are all intertwined and the red thread runs through them all. So many folks become myopic but your efforts to do the difficult assimilation of data and trends from different realms is critical to understand the whole.

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