Earlier this spring, we touched on drilled but uncompleted wells ("DUCs") and whatimpacts these DUCs may have.

This month, it seems that everywhere I turn I see an article on DUCs – which have also been referred to as the "fracklog."

Let's try to get our DUCs in a row – what information do we need to know to have an understanding of what's quacking– oh wait, wrong kind of duck:

  • What is a DUC? "DUC" is shorthand lingo for a drilled but uncompleted horizontal oil well – it is a well that has been drilled but is awaiting completion services.
  • Why are companies drilling but not completing wells? An entire article was devoted to this very subject in Oil & Gas 360 a couple of weeks ago – "Reasons for Not Completing a Well."The main theories behind DUCs seem to be: (1) conserving cash flow – actively drill the well and leave it uncompleted to keep money in the bank in the short term, due to the higher costs of completing a well; (2) the economics of basically hedging a bet for price recovery – wait until commodity prices improve then complete the well and start producing in a better price environment; (3) avoid penalty fees for cancelling a rig contract; and (4) infrastructure constraints.
  • How many DUCs are there in the United States? Well, that gets tricky – there seem to be conflicting reports. According to an article today in Oil & Gas 360, "[c]urrent estimates place the number of DUCs in the U.S. at 4,219 wells waiting to be completed." However, "A Guide to American DUCs" published by Forbes yesterday estimates a much higher figure – "As of June 23, we had approximately 6,100 DUC wells in the 14 states where we [Drillinginfo] track DUC wells." Needless to say, there is an inventory of DUCs out there...
  • Are DUCs an accurate indicator to predict future production? Your guess is frankly as good as mine. It is not just about turning on a valve with these DUC wells; completion crews must be mobilized and sent out to the wellsite to actually complete the well. How quickly that can occur depends on a lot of considerations and will likely vary by operator. An Oil and Gas Investor article from earlier this month, "Why a DUC?" sums it up nicely though: "the high DUC inventory means domestic production could come back more quickly than many expect – adding to the U.S. role as a major swing producer on the world market."
  • When are these DUCs going to get completed and start producing? Today's article in Oil & Gas 360 has the answer for us: "As economics improve in the oil patch, companies will need to bring new production online to replace assets that will fall victim to the decline curve, and the first place to look is toward the DUC wells."

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