Why EIA's Crude Production Stats Are Flawed



  • Shale oil economics are different than conventional oil.
  • EIA developed a model to try to estimate its production.
  • But the industry is managing drilled wells strategically.
  • That makes EIA’s model inherently flawed.
  • EIA has been underestimating production.

The Energy Information Administration (EIA) does not collect current survey information in estimating the weekly U.S. crude production it reports in its Weekly Petroleum Status Report (WSPR). Instead, it relies on modeling.

With the rapid development of shale oil reserves in the U.S., the EIA had to develop a new model to estimate output because shale oil economics and production are so different than conventional resource development.

Drilling Productivity Report (DPR) Model

The DPR model is a computer model that estimates recent and future and oil and gas production for seven specific regions (DPR Regions) in the U.S. The DPR model parameters are based on one single input: Baker Hughes drilling rigs counts. By regressing rig counts and monthly production, it estimates a relationship between the two.

DPR Regions. Source: Energy Information Administration.

The DPR model is re-calibrated each month to estimated how much oil and natural gas production in a play has increased as a result of the drilling and completion of new wells, and how much production from existing wells has declined as the resource in place for the existing wells is depleted (click here for detailed methodology). The DPR model also estimates the time delay between the start of the drilling of a well and that well's initial production.

The DPR model was designed to provide estimates of recent historical oil and gas production and projections of future oil and gas production on a monthly (not weekly) basis. The model parameters are re-estimated each month to reflect the long-term technological trends regarding the configuration of the drilling rig fleet, the rate at which new wells are drilled and completed, and the design of new tight oil and shale gas wells. All three trends collectively change the rig efficiency and the well productivity.

The DPR model was designed

This article was written by

Robert Boslego profile picture
Energy futures model portfolio and market analysis from an oil expert.
Seeking Alpha Marketplace Premium Service: Boslego Risk Services.

Managing Director, Boslego Risk Services

Harvard College, Economics (Honors), BA

Undergraduate thesis: "OPEC Pricing Strategy."

Harvard Business School Case Study: "Industrialized World and Oil."

Stanford University Graduate School of Business, MBA

I founded Boslego Risk Services and became a recognized expert in the area of energy price risk management (hedging) and trading, providing oil and natural gas hedging strategies to major oil companies such as Exxon, Shell, Mobil, Chevron, Texaco and Phillips; to the national oil companies of Norway, Venezuela, Mexico, Canada, France and Italy; to major users of energy products, such as Delta Airlines, United Airlines, Burlington-Northern Railroad, and Canadian Pacific Railway.

I also provided frequent market assessments and recommended trading positions to major trading firms, such as Enron, Phibro, Sempra and Vitol, and to large hedge funds.

As the recognized expert in energy hedging, I was selected by the former president, John Treat, of the New York Mercantile Exchange (NYMEX) to write the chapter on hedging in his book, Energy Futures (1990, 2000).

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (34)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.