"Surging" U.S. Shale Oil Production"

"Drill Baby, Drill Is Finally Working"

"Tight Oil Opens the Taps"

Those are some of the headlines the past two weeks as higher Iran induced oil prices are supposedly adding more rigs, completing more DUCs and coming to the aid of a desperate world in need of more cheap American oil.

Rigs are not moving up yet; they are up 12 or so in the past three weeks but still about what they were back in early March. Journalists will write anything to get you to read their shit.

Because of the time between spud and reported first production (lag) no production from new wells drilled in May/June will be realized until December 2026/January 2027 at the soonest. None of that is going to help anything on a short time frame.

One reason for the lower number of rigs is the inventory of drilled but uncompleted wells that companies are now tapping to bring additional production to market fast. Reuters’ Ron Bousso noted the tactic in a column this week, saying so-called DUCs were

Well, how much is THAT going to help?

Below is a VERY IMPORTANT chart....

Most analysts don't know how to separate drilled wells awaiting frac'ing in the normal six-month scheme of operational activity and real DUCs set back and put in inventory. So, you hear really stoopid numbers like 3,000-4,000 across America from really bad journalists. Novi knows how to count DUC's. The EIA does not. Here they are for the biggest basin in the country, per operator and per bench. There are only 560, maybe, in all of the Permian.

Please note how many DUC's there are in the Midland Basin and who operates them...Diamondback and Exxon. Every year well productivity in the Midland Basin declines because of parent/child interference, proximity degradation and pressure depletion; every year a DUC stays a DUC its likely loosing EUR value.

The top five or six benches containing the most DUC's are likely the best DUC's because those are the most productive benches. There are a lot of conventional reservoir DUC's on the Platform and some unconventional bench DUC's that will not likely get completed short of $200 oil, sustained. Better make that 450 DUCs, not 560.

Notice how many DUCs would be classified as Tier 2/3/4 material based on their locations, like far N.E Howard County, for instance. Or S.E. Reeves and Pecos Counties in the Delaware Basin.

Notice how few DUC's there are in the best two producing counties in the entire Permian, Eddy and Lea; <10. And in crummy benches. No DUCs in New Mexico...what does that tell you?

If FANG could complete all of its DUC's at once, based on its average IP180s in the Basin that would equate to 60,000 more BOPD...total growth. Based on two-year cumprods. for its typical Midland Basin wells that 60,000 BOPD will decline to 33,000 BOPD by 2H2028. Between now and then its legacy production of 550,000 BOPD from existing wells will be down to 319,000 BOPD.

At $95 WTI/Midland that's a lot of money. But are you sure the price of WTI will stay above $95 for the next two years? It might. Might not. Today's WTI was below $90.

It's important to keep things in perspective.

If you drill wells that produce 45 years, and decline 3% annually, timing isn't very important. In the shale business, when 75-80% of a wells EUR is realized in the first 36 months of production, timing is everything.

DUCs are the sector's savings plan. FANG, by the way, is $15 B, with a B, in debt. Its paying interest on DUCs while the sit there and don't make a nickel. Exxon has even more debt.

Last thing...every DUC completed, every last Tier 1 and 2 drillable locations that are drilled, is a hit on inventory. It is effectively liquidation; selling inventory off the shelf you can replace for the same price. All for exports to foreign countries and no clear plan to pay all that debt back.

I am always amazed how few people in America get that. It must be those jet vapor trails.