The Surge in DUC Wells Begs the Question: How Long Can a DUC Well Hold a Lease?

Just over a year ago, the U.S. Energy Information Administration (“EIA”) began including a supplement to its Drilling Productivity Report that contains monthly estimates of the number of drilled but uncompleted (“DUC”) wells in seven key oil and gas producing basins (the Anadarko, Appalachia, Bakken, Eagle Ford, Niobrara, Haynesville, and Permian basins). Prior DUC well inventory numbers made headlines starting in late 2015 (see here and here). The most recent EIA Drilling Productivity Report 1 shows that while DUC well inventory began to subside in the latter part of 2016 and first part of 2017, there has been a recent surge - largely led by significant growth in the Permian basin.

The economic impact of completing and bringing these wells online could create a surge in oil supply and destabilize recent crude oil price gains. Aside from the potential implications to crude oil prices, one consideration that remains top of mind for operators with DUC wells on maturing oil and gas leases is whether, or for how long, a DUC well can hold a lease.

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