U.S. crude oil production is reaching record levels in the face of declining drilling activity in basins across the nation.

U.S. crude output averaged 13.3 MMbbl/d in December 2023, passing the pre-pandemic high of roughly 13 MMbbl/d in November 2019.

Record output was achieved even as U.S. drilling and completion activity declined because of advances in horizontal drilling and fracking technologies.

That bucks the typical norm, according to the U.S. Energy Information Administration; historically, the number of new wells brought online through drilling activity has been the key determinant of whether crude output increases or decreases.

But U.S. producers are drilling longer and more efficient wells today than in previous commodity cycles. E&Ps are extracting more oil from both new wells drilled and legacy wells that have produced for more than a year.

“The share of legacy production since 2021 has remained stable, and production from new wells has continued to increase,” the EIA reported on March 5.

EIA Crude Output Monthly
New-well production has increased while oil production from legacy wells over a year old has remained flat since 2021, according to EIA figures. (Source: EIA; Enverus)

RELATED

What's Affecting Oil Prices This Week? (March 4, 2024)

Fewer wells, longer laterals, less money

U.S. producers have worked to maintain oil and gas output while spending less money to drill new wells.

There were 629 drilling rigs active around the U.S.—including 608 onshore rigs and 21 offshore rigs—during the week ended March 1, according to the most recent data from Baker Hughes Co.

That’s down 16% from 732 total rigs around the U.S. during the same period a year ago.

The number of active oil-directed rigs was 506, down 15% from 592 active oil rigs during the year-ago period.

The growth of new oil wells drilled each year has also declined emerging from the COVID-19 downturn.

New drills fell by nearly 40% in 2020 to 7,147 due to the economic impact from the pandemic. Since then, the number of new wells coming online each year has slowed compared with pre-COVID rates.

“In 2022, the number of new crude oil wells was the same as in 2017,” the EIA wrote. “In the first half of 2023, drillers increased the number of new wells by 12% (624 wells) compared with the same period in 2022.”

EIA New Wells Drilled
The number of new oil wells drilled in the U.S. has increased each year emerging from COVID—but at a slower pace compared to pre-pandemic levels. (Source: EIA; Enverus)

The number of new oil wells peaked at 13,745 in 2014.

The oil and gas sector has benefitted from operational efficiencies like improving completion designs, executing larger projects, drilling longer lateral lengths and refining capex allocation, said Siebert Williams Shank Managing Director Gabriele Sorbara.

Several of the largest oil producers in the Permian Basin, including Exxon Mobil Corp., Occidental Petroleum, Diamondback Energy, Permian Resources, Ovintiv and Civitas Resources, aim to drive greater drilled and completed (D&C) efficiencies this year by drilling longer laterals.

Oilfield service inflation, which plagued the upstream sector emerging from the COVID downturn, is also declining, which helps bring down D&C costs for producers, Sorbara said.

RELATED

US Oil, Gas Rig Count Rises to Highest Since September: Baker Hughes