...Aaaaand, Its Gone

The EIA has recently released its proven developed reserve (PDP) estimates for the US at the close of 2022. I borrowed this chart of EIA, Permian Basin reserves from a gentleman who does good work, George Kaplan; comments are mine.

What portion of these Permian PDP reserves are conventional are very small; we should consider all PDP reserve growth since 2015 mostly unconventional tight oil reserves. I have no idea where the EIA gets this data; my guess it is taken from voluntary submissions and/or SEC filings, none of which are independently audited. Most of these reserve estimates, I assume, are based on type curve fitting. Historically we (incld. the WSJ) have caught these guys exaggerating EUR's by as much as 35%, so you can take its 2022 "reserve" estimates with a grain of frac sand.

The price of SEC oil averaged $93 in 2022, up 35% from 2021. In spite of that Permian Basin tight oil PDP reserves fell in 2022.

For fun lets consider the comment on the left to be accurate and probably also indirectly related to PDP reserve growth from year to year. I understand that is not entirely correct as older HZ wells still represent reserves but realistically, PDP reserve growth occurs in increments of 400-500K BO units every time a new well is completed.

But below is a chart showing how fast 2022 Permian HZ wells, for instance, have declined the past 22 months...almost 82% ! We can then say, for fun, that most of all those EIA Permian tight oil PDP reserves booked at the end of 2022 are already gone, depleted.

This should make perfect sense beacause we know that legacy production in the Permian Basin declines around 45% annually.

85% of all tight oil well drilled in the Basin each year do nothing more than replace production that has declined the previous year.

We've added new PDP reserves since 2022, sure, but by the time they are recognized and reported by the EIA, they too will be just about depleted. If proven producing tight oil reserves make you feel good about your oily future, you need to be cheerleading, big time, for the sector staying on the drilling hamster wheel, non-stop.

Overall, US PDP reserves, shale and conventional, ranks us very low on the list of other producing nations in the world, like 3rd-string level. Iran ( and therefore China) has over 4 times the proven producing reserves the US has. We are the largest oil consuming nation in the world, the SPR is at its lowest levels in 40 years, yet we average 4 MM BOPD of exports to foreign countries. Its hand to mouth in America, baby. No oil savings for us, no m'am.

Rune Likvern once taught me because of PDP tight oil decline, reserve estimates were essentially worthless and at any given time PDP reserve to production ratios (R/P) for shale, now a very important metric in gauging the health of our nations oily future, was never more than 3.5-4.0 years, max.

As long as we can keep drilling $11 MM, 450K BO EUR shale wells, one after another, I guess we'll be OK.

For awhile.