Introduction

The EIA has published estimates of drilled, but uncompleted wells (DUCs) since September of 2016. Their process is described in the noted report, but broadly uses rig counts in a region, historic correlations to new wells, FracFocus.org and state completion data to determine drilled and completed wells. There is a regional breakdown, but overall, it looks like this:

With no context, we have no way to evaluate this graph, or the process, especially since EIA provides little detail in their report. But Synmax also calculates DUCs, and when we add our calculated DUCs to the graph, a very different picture emerges. The rest of this report will discuss how we believe we have better, and more timely DUC counts. Given the current state of the markets, more than ever, timely, accurate fundamental information is required.

Comparison

Though we have broadly similar levels - in the thousands - the dynamics are very different. This begs the question, how to decide which is more correct? Considering that the decision to delay completing a well is almost purely a financial one, prices should give us an indication of which one to believe. One would expect in times of high, or rising prices that DUCs would tend to build, and in low or falling, go down. (An argument can be made for the reverse, but either way, relatively steady is not to be expected).

This graph is very busy, but let’s take a moment to unpack it. In red and green, as before are EIA and Synmax DUCs, respectively. But we’ve superimposed Henry Hub natural gas and Domestic Sweet crude oil (i.e. WTI) monthly average rolling front month prices (blue and black, respectively).

You can see that in times of severe price dislocation - mid-2020, or early 2022, the EIA’s DUC count is essentially unresponsive. It’s difficult to make the case that in the first 6 months of 2020 (we all remember what was happening then), when activity collapsed by 75% in the second quarter of 2020, that DUCs actually went up. Or that in 2022, as rig count was building to its local peak in mid-2022, and prices were spiking, DUCs continued to decline? Other than listing their data sources, EIA’s methodology is (surprisingly) opaque, and frankly, we find their results unrealistic.

The regional breakdowns also exhibit surprising differences (and similarities). For example, for North Dakota, we have a correspondence between EIA & Synmax, again except for the beginning of 2020.

But for most regions, we see a divergence. We know that for the past few years, Appalachian producers have been very actively managing their inventories based on prices, yet EIA counts are surprisingly smooth and rising, whereas the relationship of rig counts and frac crews in the area since early 2023 indicates a flat to declining DUCs, which is what we see (the black line is the monthly average of Synmax’s observed rig to frac crew ratio, which should generally indicate the changes in the DUC count).

EIA also has Haynesville DUCs building smoothly from the end of 2021 to mid 2023, when neither prices, nor the relationship of rigs to crews support that pattern.

Finally, when looking at Permian, there is a clear relationship between the rig/crew ratio, and DUC counts, in the directions expected - in times of increasing/high ratio, increasing DUCs and in times of declining/lower ratios - declining DUCs.

Conclusion

We can’t even speculate why there are differences, as EIA’s data and methodology are only described at the highest level. Historically, the data available to EIA and Synmax is approximately the same - state reports of spud dates, completions, etc. It’s notable that EIA & Synmax counts for North Dakota are much more closely aligned, considering that ND is noted for its rapid, accurate reporting. However, most state data is six to fourteen months delayed (i.e. before the data stops changing). To make up that gap, EIA says they are using regional rig count estimates and historic correlations to completions, to estimate DUCs today.

And this is where there is a clear, distinguishable difference. Synmax is using daily satellite observations of rigs and frac crews to observe activity in real time. Our only estimates are the number of wells that can be completed by a single crew in the observed time on the pad, and we adjust those once the state data comes out.

APPENDIX - Synmax DUC Counting Algorithm.

We count horizontal wells as DUC at any time between spud date and completion start date. However, if that time exceeds 2 years, we then exclude that well from our counts (so-called Dead DUCs). In addition, we use a combination of production start date, state-reported completion date, FracFocus-reported completion date, and our satellite completion dates to determine completion start date, as well as state-reported spud dates and our satellite monitoring for spud dates.

The rise of delayed Tie-In-Lines (TILs) - wells that are fractured, but final tie-in activities are deferred, to be brought on very quickly later - will adjust this number up slightly. We do monitor for this type of activity in Appalachia and Haynesville and estimate that this number is on the order of 50 wells.