U.S. Second Largest Oil Field Production Falls As Decline Rates Rise

While Americans continue to believe that the U.S. will become energy independent, the county’s second largest shale oil field is seeing a drop in production due to a rising decline rate.  The Eagle Ford Region in Texas experienced an increase in production as the oil price, and drilling activity increased since the beginning of 2016.

At its peak in March of 2015, the Eagle Ford was producing more than 1.7 million barrels of oil per day (mbd) but fell 30% to 1.2 mbd in November 2016 as the oil price declined.  However, as the oil price recovered and drilling rig activity increased, oil production at the Eagle Ford rose to 1.4 mbd currently.

Unfortunately, oil production at the Eagle Ford is forecasted to decline in October.  According to the EIA’s Drilling Productivity Report, the Eagle Ford will add 89,000 new barrels of oil per day (bd) in October but will lose 98,000 bd due to legacy declines:

The top graph in the chart above shows the monthly decline rate in the Eagle Ford Region.  As oil production increased in the field, so did the decline rate.  When the Eagle Ford peaked in oil production at the beginning of 2015, so did its legacy decline… a whopping 140,000 bd.  Furthermore, as drilling rig activity decreased, the decline rate started to fall, shown as the line moving higher.  Eagle Ford’s monthly decline dropped to 80,000 bd at the beginning of 2017.  However, as drilling rig activity increased once again, from 36 at the end of 2016 to 91 in July, the decline rate started to increase as well.

Even though the Eagle Ford will add 89,000 bd of new production in October, it will lose 98,000 bd, for a net loss of 9,000 bd:

Now think about this for a minute.  The drilling rig activity in the Eagle Ford surged from 36 at the end of 2016 to 91 by June, but production only increased 200,000 bd.  Now, production is already falling as drilling rig activity moderately declines.  Also, most of the companies producing shale oil in the Eagle Ford didn’t make any money as production increased 200,000 bd.

While the Eagle Ford is suffering a significant monthly decline rate, it pales in comparison to what is taking place in the Permian Region.  The EIA forecasts that the Permian Region will experience a stunning 160,000 bd decline in October:

As we can see, the Permian Region will add 215,000 bd of new production in October, while its decline of 160,000 will add a net of 55,000 bd for the month.  To increase oil production in the Permian, from 2.0 mbd in June 2016 to 2.6 mbd currently, the drilling rig count jumped from 145 to 373.  Thus, the drilling rig count increased by a staggering 228 to add that 600,000 bd of production.

Unfortunately, the Permian will suffer the same peak and decline as did the Eagle Ford.  While many energy analysts believe oil production will continue to increase in the Permian until 2022, I don’t belong to that mindset.  Rather, I think oil production at the Permian may peak and decline a lot sooner, especially if the oil price head back into the $40 range.

The U.S. Shale Oil Industry is in serious trouble as the majority of companies have used a lot of debt to finance continued drilling.  The massive $250+ billion in debt will never be repaid.  When investors finally realize they are the SHALE OIL BAG HOLDERS, funds for future drilling will dry up and blow away.  As funds dry up, so will production… like a rock.

The collapse of the U.S. Shale Energy Ponzi Scheme will destroy the myth of America’s energy independence and for all.

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27 Comments on "U.S. Second Largest Oil Field Production Falls As Decline Rates Rise"

  1. Steve,

    It is no wonder that the public is so confused. Price of oil declines, production declines, price of oil goes up, they add more rigs and production goes up. They don’t see the overall picture because you can’t fit into a 7 second sound byte.

    The fact that they went from each rig producing on average about 14,000 bpd to an additional 228 rigs producing on average about 7,000 bpd is a sure sign that the oil companies are in big trouble.

    Thanks for another great article.

    SteveW

  2. Wow! This is shocking! Shale oil will blow up before 2020. Let’s see what will happen when all these nice dollars go down the crapper.

    Thanks for the article. Awesome!

  3. I bet the trolls stay away on this thread. Cheap arguments won’t do the trick when things get serious.

    Another fact: i don’t “own” a creditcard, i don’t use paypal, i live in the Netherlands and i don’t have a $ account.

    Give me your p.o. box Steve, i’ll send you a few eagles, silver that is 😑, so i can become a member.

    Regards, houtskool (charcoal)

  4. CITI CEO warns of oil shortages coming as soon as 2018

    https://www.bloomberg.com/news/articles/2017-09-25/citi-says-get-ready-for-an-oil-squeeze-than-an-opec-supply-surge

    The Oil Age may come to an end for a shortage of oil. ~ Saudi saying

  5. While the trend is clear, we should not forget about solutions that work nicely. I.e. war, more war, bailouts, … and wars combined with bailouts. In addition imagine unimaginable (like NIRP was an unimaginable idea 15 years ago).

    Don’t take me wrong, I’m 80+% in PM’s. But the whole system has exceeded insanity levels long time ago, we never know what comes tomorrow. While most economic solutions are far from actually resolving something, the patient can be kept alive (although in coma) for some more time with extraordinary measurements.

  6. Your articles are so awesome but man, does my head spin round and round! Mind-blowing what’s happening all around us..!

  7. Just wait until we experience a 10% or 20% drop in oil supplies. In a few years or sooner we certainly will. When it hits the economic and social damage will be catastrophic. The end of Western Civilization, from China to Europe, to the US, will not occur when oil runs out. The economic and social chaos will occur when supplies are merely reduced sufficiently.

  8. Maybe this is why some are moving to EV sector, just saying.

  9. This will just drive the price up and make our industry stronger, as we can open up new fields offshore off both coast and alaska it’s, a good thing

    • Diogenes Shrugged | September 30, 2017 at 10:15 am | Reply

      Higher prices will only encourage banks to lend even more to these lousy credit risks. They’ll also clobber consumption, so you’re chasing your tail. The Beverly Hillbillies won’t be drilling in new, exotic places if they can’t even cover their interest payments.

    • Wrong. Conventional oil discoveries are at an all time low. And have been declining every decade since the 1960’s.

      http://imgur.com/a/W60yn

  10. The solution: NG weighted producers without debt.

  11. benchmarkwti gmail | September 30, 2017 at 11:08 am | Reply

    I hope that all of y’all investigated OPEC cutback early this year. If you did a little research you would see it wasn’t really a cut back at all.

    • benchmarkwti gmail,

      Here’s a question for you. Was there a reason that you left comments under two different names, 1) benchmarkwti gmail; 2) Valerie Walker?

      You see, as the website manager, I can see the email address as well as the IP addresses people use when they leave comments.

      I don’t mind people using different names under the same email address, but I find it quite interesting that you had a CERTAIN BULLISH OPINION that you had to make sure came from two different sources.

      steve

      • One serious bashing a day
        Keeps the trolls far and away

        Good one. Who’s going to pay for higher oil prices, the Fed? Thought so.

  12. Art Berman states many reasons why there will be an OIL PRICE SPIKE within the next 5 years…

  13. The easy, not so easy, and the more difficult pickings are,going, going, almost gone. Lots of oil to be found but it requires, or will require, more than a barrel to acquire a barrel. Price is rendered irrelevant. Is my understanding correct? Has the time line been adjusted ?

    • @Spheres777

      That and the fact that loss of oil based on EROEI in the future will drive the economy down even faster than simply higher prices. The decline in economic activity means even less demand for oil, and as I understand it the oil price paradoxically remains subdued, giving everyone the impression that there must be plenty of oil if the price keeps dropping. There isn’t “plenty of oil”. Its only because the demand for oil is decreasing faster than the dwindling supply. At least this is my understanding from Steve’s previous articles based on theories espoused by the Hills Group.

  14. Lots of trouble in oilland, “Saudi Arabia’s economy contracted for two quarters in a row for the first time since the global financial crisis”.
    https://www.bloomberg.com/news/articles/2017-09-30/saudi-gdp-shrinks-for-second-quarter-in-a-row-amid-opec-cuts

    Thanks for all the writing Steve!!

  15. Dang, looks like we need to build coal fired power plants next to a coal mine to generate electricity. May need old steam engine to dig coal.
    But gotta power the grid so I can buy some silver with my cryptos. 😱

  16. Thanks Steve, regards

  17. Slithereen Guard | October 3, 2017 at 3:59 am | Reply

    Banks cut their oil-price forecasts for a fifth consecutive month despite a recent price rally amid concerns that the oversupply of crude will grow next year.

    http://www.marketwatch.com/story/banks-cut-oil-price-forecasts-despite-recent-rally-2017-10-03

    Oil world is extremely funny.
    It can go in any direction.
    Either they will drill on every oil left in the ground leading to oversupply. Or they will run out of money to drill leading extremely high price next few years due to the shortage.

  18. Conventional Oil Peaked in 2006 –IEA-EIA-NATURE-ENERGY

    http://imgur.com/a/uCz7V
    http://www.nature.com/nature/journal/v481/n7382/full/481433a.html
    http://www.sciencedirect.com/science/article/pii/S0360544213009420

    New Oil discoveries by scientists have been declining since 1965 and last year was the lowest in history –IEA

    http://imgur.com/a/W60yn

    We have been draining our oil reserves by consuming more oil than we discover since the 1980’s – ASPO
    http://imgur.com/a/uJ0Rg

    Aging giant oil fields produce more than half of global oil supply and are declining (Hook, 2009)

    http://www.sciencedirect.com/science/article/pii/S0301421509001281

    HSBC Global Bank warns 80% of the worlds conventional fields are declining and world oil shortages ahead

    https://www.research.hsbc.com/R/24/vzchQwb

    Any questions peak oil deniers?

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