The Shale ‘Fracklog’ Is Back as US Oil Drillers Hoard Wells

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(Bloomberg) US oil and gas companies fracked fewer wells than they drilled for the first time in more than two years, indicating a possible slowdown in production despite elevated prices and concerns about a global energy crunch.The number of drilled but uncompleted oil and gas wells, also known as DUCs, rose by 8 to 4,408 in October compared with the prior month, the US Energy Information Administration said Monday. The expansion ends a 27-month-long streak of declines in the DUC count, the longest according to EIA records dating back to the early days of shale.

Bringing a new shale well online involves two basic steps: drilling, and then hydraulic fracturing, requiring separate crews who sometimes work months apart.

Supply of drilled, unfracked wells posted first hike in 28 months

The DUC count shows whether the shale sector is building up a cushion of wells — a so-called fracklog — that’s ready to be fracked, or whether it’s eating into that inventory. The count started to shrink at the height of the pandemic, when producers idled rigs and cut costs to the bone in the face of plunging oil prices.

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The first signs of a return to growth in the fracklog appeared last week when explorers boosted the rig count by the widest margin in almost five months, signaling a potential pivot back toward replenishing the supply of ready-made wells again.

Oil and natural gas prices have been resurgent since the end of the pandemic. Yet much of the shale industry has kept a lid on production, due to pressure from investors not wanting to see a repeat of previous boom-and-bust cycles, a shortage of vital machinery such as frack pumps, and costs hitting a record.

The industry is also not getting the same bang for its buck that it used to, as the productivity of oil rigs continues to decline. Oil production per rig from new wells has fallen to the lowest levels since July 2020, according to EIA data.