U.S. shale producers are drilling at the highest rate in 18 months but have left a record number of wells unfinished in the largest oilfield in the country – a sign that output may not rise as swiftly as drilling activity would indicate.
Rising U.S. shale output has rattled OPEC’s most influential exporter Saudi Arabia and pushed oil prices to a near four-month low on Wednesday. U.S. production gains are frustrating Saudi-led attempts by the world’s top oil exporters to cut supply, drain record-high inventories and lift prices.
Investors watch data on the number of rigs deployed in North American oil and gas fields as a leading indicator for output. But the rising rig count and frenetic drilling activity in the Permian Basin in West Texas is not all about pumping oil.
During the 2014-2016 downturn in global oil prices, the number of wells left incomplete grew as companies shut down rigs, laid off workers and retreated from the fields. When prices picked up, operators were expected to pump the oil from those incomplete wells before spending money on drilling new ones.
Instead, the number of incomplete wells has risen. A record 1,764 wells were left unfinished in the Permian in February, according to U.S. government data going back to December 2013. In February alone, 395 wells were drilled and only 300 completed. That was the highest drilling rate in the Permian in two years.