2024 unconventional wells are on track to be the best cohort drilled ever, Ted Cross, VP of Novi Labs

Looking at lateral lengths, 2024 Q1 is the first quarter ever where operators have, on average, drilled oil wells longer than 10,000', adding nearly 600' on average over the past year.

2024 unconventional wells are on track to be the best cohort drilled ever, a major reason US oil production has been holding up surprisingly well in this year. Longer laterals, high-grading, and well designs all are playing a role. Let's dig in.

First, let's look at the numbers. Here, we are plotting 3-month cumulative oil production (green line) for each quarter-by-quarter cohort of wells since 2017. Operators have increased per-well productivity for four straight quarters, up 16% since the 2023 Q1 low. 2024 Q1 wells were an average 275 barrels better than the previous record set in 2020 Q4. (That is a rounding error over 90 days, but still, impressive!!)

Looking at lateral lengths, 2024 Q1 is the first quarter ever where operators have, on average, drilled oil wells longer than 10,000', adding nearly 600' on average over the past year. However, if you normalize production by lateral length, productivity has still improved, marking a significant trend change.

Operators have brough online fewer wells each quarter since 2023 Q2 as prices have driven activity lower. During slowing activity, operators usually high-grade to focus on the better locations. Consistent with this, the fraction of Permian wells has increased from 59% at the start of 2023 to 63% today, though we see similar per-well production improvements across the Permian AND most basins, especially the Denver-Julesburg, Williston, and Anadarko.

Additionally, emerging plays have proven very productive: in 2023, the average Appalachian Utica well was 7% better than than the average Permian well, and the average Uinta was 14% better (!!). This comes at the same time as strong performance within the Permian from emerging zones like the Jo Mill, Dean, and Barnett.

Finally, average inter-well spacing has crept up from 599' in 2021 to 696' in 2024. While some of the 2024 wells have yet to see their closest neighbors drilled, the overall trend to slightly-wider spacing is consistent with a move to high-graded inventory: if you can turn a super tight development that has Tier 2-equivalent performance to Tier 1 while widely spaced, you'll do that when prices are low.

Unconventionals have simply refused to collapse like many bears have anticipated. Operators continue to innovate in terms of well design, new play development, and spacing. These effects of innovation and high-grading act as a balancing weight during periods of declining activity, especially during consolidation as large operators prioritize the long-term.