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Well completions continue to lag behind wells drilled in Texas, Dallas Fed says

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Essential Energy Insights - November 2021


Well completions continue to lag behind wells drilled in Texas, Dallas Fed says

Persistent bottlenecks on takeaway capacity continue to plague Texas oil and gas drillers, as the number of well completions lags behind drilling activity, the Federal Reserve Bank of Dallas said in an October note on energy sector indicators.

Overall well completions are slowly hitting the brakes, compared to the growing numbers of wells drilled month-over-month, according to the U.S. Energy Information Administration. "Well completions ... have not kept pace with drilling activity, especially in the Permian," the bank said in its note. "Lower wellhead prices in West Texas, driven by transportation bottlenecks, are necessitating the slower rate of completion and putting downward pressure on demand for related services."

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The Permian Basin accounted for roughly 40% of wells drilled during the summer months but only a third of completions, the report said. The trend also showed in the overall business activity index in the energy sector during the third quarter, according to a survey from the Dallas bank.

Exploration and production activity in Texas rose while activity by oilfield services firms fell during the third quarter, the survey found, causing the aggregate business activity index to dip from 44.5 the previous quarter to 43.3. Oilfield services firms' activity index decreased to 45.9, which was slightly offset by the increase in the index for exploration and production firms to 41.8.

The rig count held steady from late June through September, even as more wells were drilled, "suggesting ongoing gains in drilling efficiency over that time," the report noted.

In September, monthly average Brent crude prices came in at $79, an increase over the weak summer period. West Texas Intermediate crude priced in Midland, Texas, also saw an increase in September, averaging $58 compared to the $52 average in August. WTI priced in Cushing saw a smaller increase, averaging $70 in September. Henry Hub natural gas prices came in at $2.97 per MMBtu for the month, while Waha prices averaged $1.56 following a steep decline in the second half of September to reach a low of 81 cents per MMBtu.