Idle Chatter On DUCs And Related Data Points -- February 3, 2016

I'm going to take a break from blogging in a few minutes. This last note for awhile won't go into much explanation. This post is intended for those in the audience with a pretty good feeling for / a pretty good understanding of the Bakken.

With regard to DUCs, there is a lot of discussion about how fast drillers can bring these DUCs on line. The pessimists suggest with 1,000 DUCs now (and likely to be 1,500 before 2016 is over), and a shortage of frack spreads, it's not going to be easy to get those DUCs on line as fast as some might suggest. I disagree. I think folks will be surprised how fast drillers can get these wells fracked  / clear up the backlog if the price supports such action.

However, I think there is a much, much bigger "thing" going on. There are two types of drillers out there right now: those with deep pockets, and those with pockets whose change has fallen through the holes.

Those with nearly empty pockets are producing at maximum production; those with deeper pockets are producing just enough to keep things going at the rate they select.

I don't have time to write any more but take a look at these two updates to see if you can see what I'm seeing.

• http://themilliondollarway.blogspot.com/2015/12/a-reader-asks-about-production-profile.html.
• http://themilliondollarway.blogspot.com/2015/12/random-look-at-15-wells-in-one-640-acre.html.

As usual, I might be making too much out of this, but I don't think so. I did not cherry pick. I was in the process of updating some things that I had listed earlier as "things to follow up on" and these were the first two items I came across. I am sure there are a hundred similar examples.

Bottom line: in addition to fracking DUCs, there are a lot of completed/fracked wells that are being "managed." Those wells can see production surge in less than 30 days. And with all the pad drilling, it will become even more common.

As long as I digress: when they build a new natural gas plant, one sees promoters telling us it will take 2,000 workers to build it (temporary jobs) and then once the natural gas plant is on line, it will take about 45 employees to run it (long-term jobs).

I'm starting to wonder if we aren't seeing this in the "manufacturing stage" of the Bakken. The Saudi Surge/Slump forced Bakken operators' hands faster than planned, and it's very, very painful, but if one uses the "new" natural gas plant as a metaphor, it took thousands of temporary jobs to get the Bakken up and running (200 rigs/month); now that the "Bakken manufacturing plant" is up and running, it takes a lot fewer employees (35 rigs, perhaps).

Note: it takes 35 rigs to maintain a certain level of activity; this does not mean that the number of rigs won't increase significantly if the price of crude oil supports increased activity. Unlike a natural gas plant that maintains the same number of employees over time (for the most part), the "manufacturing stage" in the oil patch is more like typical manufacturing -- demand will drive more activity requiring more employees (measured in rigs).

Future Housepainter