www.eia.govU.S. Energy Information Administration Independent Statistics & Analysis

Forecasting U.S. Crude Oil Production

ForEIA Webinar: Forecasting U.S. Crude Oil ProductionNovember 16, 2017 | Washington, DC

ByJohn Staub, Director, Office of Petroleum, Natural Gas & Biofuels Analysis

Key takeaways • The November Short-Term Energy Outlook (STEO) is forecasting U.S. oil

production for December 2017 at 9.7 million barrels per day (b/d)

• U.S. oil production grew 340,000 b/d in H1 (first half) 2017 and is forecast to grow by 336,000 b/d in H2 (second half) 2017

• Production in the Permian grew by 214,000 b/d in H1 2017 and is forecast to grow by 257,000 b/d in H2 2017

• Hedging activity has likely increased with rising WTI prices

• Increased frack sand usage increases well productivity but slows well completions

Forecasting U.S. Oil Production November 16, 2017 2

0

2

4

6

8

10

12

Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18

forecast

Permian

Niobrara and AnadarkoBakken

Eagle FordGulf of MexicoAlaskaRest of U.S.

Permian

Niobrara and Anadarko

Bakken

Eagle Ford

Gulf of Mexico

Alaska

Rest of U.S.

Monthly U.S. crude oil productionmillion barrels per day

Projected change 2nd half vs 1st half 2017thousand barrels per day

Forecasting U.S. Oil Production November 16, 2017

November STEO forecasts Permian to lead production growth from H1 to H2 2017

Source: EIA Short-Term Energy Outlook, November 2017

3

-200 0 200 400

+257

-7

-49

-18

+117

+5

+31

Crude oil productionthousand barrels per day

Crude oil productionthousand barrels per day

Forecasting U.S. Oil Production November 16, 2017

Forecasted Permian production growth stands out compared to six other key Lower 48 regions

Source: EIA Short-Term Energy Outlook, November 2017

4

750

1,250

1,750

2,250

2,750

3,250

Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18

Permian Eagle Ford Bakken

forecast

0

200

400

600

800

1,000

1,200

Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18

Niobrara Anadarko California Other

forecast

2,118

3,076

2,647

Dec. values

Factors affecting EIA’s Short-Term Energy Outlook oil production forecast• Oil prices

• Rig counts

• EIA-914 survey of oil production by state

• Drillinginfo well-level data

• Fracfocus completion filings

• 10Ks, trade press, infrastructure reports

Forecasting U.S. Oil Production November 16, 2017 5

DI well level production data

EIA-914

New well profiles

Legacy well

declines

Pre-2015 well

production

2015-latest well

productionLower 48 crude oil

production forecast

Assumptions- rig efficiency- tech improvement- DUCs

Historical rig counts

Price forecasts

Cash flow proxy

Rig count forecast

New well forecast

New well production

lagged

lagged

DI well level production data

EIA-914

New well profiles

Legacy well

declines

Pre-2015 well

production

2015-latest well

productionLower 48 crude oil

production forecast

Assumptions- rig efficiency- tech improvement- DUCs

Historical rig counts

Price forecasts

Cash flow proxy

Rig count forecast

New well forecast

New well production

lagged

lagged

Permian region crude oil productionmillion barrels per day

Forecasting U.S. Oil Production November 16, 2017

New wells completed in Permian drive the growth in H2 2017 and 2018, providing 1.7 MMb/d of production by December 2018

Source: EIA Short-Term Energy Outlook, November 2017

7

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2011 2012 2013 2014 2015 2016 2017 2018

Jan. 2015 – Jul. 2017 well production

New well production

forecast

Pre-2015 well production

1.7

0.7

0.6

3.1

Dec 18

0.9

1.5

2.5

Aug 17

$0

$20

$40

$60

$80

$100

$120

0

500

1,000

1,500

2,000

2,500

2010 2012 2014 2016 2018

U.S. rig countsrigs

Permian rig counts rigs dollars per barrel

Forecasting U.S. Oil Production November 16, 2017

Early 2017 WTI price flattened and Permian rig count increased as rigs from other regions moved to Permian

Source: Bloomberg, Baker Hughes, EIA Short-Term Energy Outlook, November 2017

8

four-month lagged WTI price

actual rigs

$0

$20

$40

$60

$80

$100

$120

0

100

200

300

400

500

600

2010 2012 2014 2016 2018

forecastforecast

020406080

100120140160180200

0

500

1,000

1,500

2,000

2,500

3,000

Fracfocus completion filings in Permian regioncounts

Permian region oil productionthousand barrels per day

Forecasting U.S. Oil Production November 16, 2017

Weekly Fracfocus Permian region completion filings declined in 2016 but production increased in 2016 and 2017

Source: FracFocus, EIA Short-Term Energy Outlook, November 2017

9

forecast

Annual averages

Average new well oil productionbarrels per day

Forecasting U.S. Oil Production November 16, 2017

Permian average productivity per well continues to increase in 2017

Source: EIA, Drilling Productivity Report

10

050

100150200250300350400450500

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32Months since first production

2017201620152014201320122011

U.S. crude oil productionmillion barrels per day

Forecasting U.S. Oil Production November 16, 2017

Exaggerated growth rate in the November STEO forecast as operations returning to normal after Hurricanes Harvey and Nate

Source: EIA Short-Term Energy Outlook, November 2017

11

7.5

8.0

8.5

9.0

9.5

10.0

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17

forecast without hurricanes

published forecast

0

0

1

2

3

4

5

6

7

8

9

10

May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17

new productionold production

U.S. crude oil productionmillion barrels per day

Forecasting U.S. Oil Production November 16, 2017

EIA forecasts 1.5 million b/d of new production in December 2017 from wells that started or will start producing in Sept. through Dec. 2017

Source: EIA Short-Term Energy Outlook, November 2017

12

$0

$10

$20

$30

$40

$50

$60

$70

Jan-17 Jul-17 Jan-18 Jul-18

EIA Nov STEO

8.5

9.0

9.5

10.0

10.5

11.0

Jan-17 Jul-17 Jan-18 Jul-18

U.S. crude oil production million barrels per day

WTI spot prices barrels per day

Forecasting U.S. Oil Production November 16, 2017

U.S. crude oil production and WTI price forecasts reflect market uncertainty

Sources: Forecasts provided by Barclays, Citi, Deutsche Bank, Drillinginfo, ESAI Energy, IHS, PIRA, Raymond James, Rystad Energy during summer and fall 2017, EIA Short-Term Energy Outlook, November 2017.

13

EIA Nov STEO

forecastforecast

For more informationU.S. Energy Information Administration | www.eia.gov

Short-Term Energy Outlook | www.eia.gov/steo

Drilling Productivity Report | www.eia.gov/petroleum/drilling

This Week in Petroleum | https://www.eia.gov/petroleum/weekly

Monthly Energy Review | www.eia.gov/mer

Monthly Crude Oil and Natural Gas Production | https://www.eia.gov/petroleum/production

Today in Energy | www.eia.gov/todayinenergy

Forecasting U.S. Oil Production November 16, 2017 14

Additional Materials

Forecasting U.S. Oil Production November 16, 2017 15

Forecasting U.S. Oil Production November 16, 2017

There are 57 regions in the STEO Lower 48 model

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