In the final segment of the series- allow me to present the ‘piece de resistance’. Before continuing- you may wish to review the “Dear Reservoir Engineers” beating to remind yourself that when wells are drilled too closely, they steal reserves from each other.

I get it- parent-child; parent-cousin- that’s a lot of family dynamics but stay with me. ‘Stealing’ happens in two ways: lower b factors than the parent well and a higher terminal decline rate. So what?!

Let’s do an exercise:

Step 1. Take every well drilled in 201X and plot the actual production (vintage wedge)

Step 2. Analyze the next year volumes from Jan and April. That is- look at the base decline without new wells.

Step 3. Repeat. Do it for every year since 2014 in all the major oil basins.

Step 4. Post data to LinkedIn. The answer: in every basin- decline rates are the highest they have ever been. Let that sink in.

Add to that that- 50% of the oil production in the US is from HZ wells. AND- 41% of that production is from wells that came on LAST YEAR! (declining at the highest rate ever). As activity ramps down in Q3 and Q4 to meet 2019 capital and free cash flow targets- the pace of completions will fall, declines will take hold and that is called “Peak Oil”.