EIA completes corrections to drilling estimates series.(Energy Information Administration)(Industry Overview)(Statistical Data Included)

THE AUTHORS

William Trapmann is an economist with the Energy Information Administration of the U.S. Department of Energy. As a senior analyst, his areas of responsibility include natural gas markets and prices, natural gas transportation, supply analysis, and forecasting, and issues in supply modeling. Prior to joining DOE, he worked as a consultant in diverse areas of energy analysis. Trapmann holds a BS degree in mathematical economics from St. Peter's College in Jersey City, N.J., and an MS degree in economics from the University of Maryland. E-mail: william.trapmann@eia.doe.gov

Phil Shambaugh received a degree in engineering from Princeton University, then a master's in operations research from Johns Hopkins University. He worked in private industry, then on the senior staff at the National Academy of Sciences before joining the U.S. government. He has spent the past 16 years as an operations research analyst at the EIA. He has been a senior author or co-author on a number of publications involving drilling and production statistics.

The Energy Information Administration (EIA) has published monthly and annual estimates of U.S. oil and gas drilling activity since 1978.

These data are key information for many industry analysts, serving as a leading indicator of trends in the industry and a barometer of general industry status. They are assessed directly for trends, as well as in combination with other measures to assess the productivity and profitability of upstream industry operations. They are major reference points for federal and state policymakers.

Private sector users include financial analysts assessing investment opportunities. Firms with upstream operations also rely on these data in apprising their circumstances relative to those of their competitors. ETA uses these data in its own analytical and modeling work.

ETA does not itself collect drilling activity data. Instead, it relies on an external source for data on oil, gas, and dry well completions. These data are provided to ETA monthly on an "as reported" basis.

Due to lags in the reporting of well completions which can (though most do not) range up to several years, EIA must statistically adjust the "as reported" completion data to obtain estimates of the numbers of completions that would have been reported had there been no reporting lags. Essentially, this is done by assuming that the pattern of reporting lags observed in the past holds true for the present and making appropriate upward adjustments to the reported numbers of completions on that basis.

Discrepancies detected

As an integral part of its data gathering function, ETA routinely monitors data quality and periodically conducts work intended to enhance its data systems. During a recent effort to enhance EIA's well completion data system, the detection of unusual patterns in the well completion data as received led to an expanded examination of these data.

Substantial discrepancies between the data as received by ETA and correct record counts since 1987 were identified. For total wells by year, the errors ranged up to more than 2,300 wells, 11% of the 1995 total, and the impact of these errors extended backward in time to at least the early 1980s.

When the magnitude and extent of the "as reported" well completion data problem were confirmed, ETA suspended its publication and distribution of updated drilling data. EIA staff proceeded to acquire replacement files with the "as reported" records and then revise the statistical portion of its drilling data system to reflect the new information.

The replacement files unfortunately also included erroneous data based on the improper allocation of wells between exploration and development. Users of EIA drilling activity data therefore are advised that the drilling activity data that were published or otherwise distributed by EIA prior to August 1998 are not necessarily valid.

Two problems resolved

EIA has now resolved the two data problems and generated revised time series estimates for well completions and footage drilled.

While most industry trends remain consistent with those of the initial, incorrect series, the revised series does exhibit certain differences, chief among which are:

* Total well counts by year in the initial and revised series vary by less than 0.5% until 1996, when the difference is 1.3%.

* Drilling activity did attain its peak level in 1981, but the industry completed an estimated 91,553 wells as opposed to the prior estimate of 90,034.

* The decline in drilling during the mid 1990s was not as steep as previously indicated. The wells in 1995 had been underestimated by 2,384 wells-a difference of 11%.

* Success rates, measured as the share of successful gas and oil wells relative to total wells, are similar in the initial and final drilling series, but the improvement in the mid 1990s was not as great as previously indicated.

The remainder of this report presents background on the drilling activity data: what the records are, how they are collected, and the resulting difficulties in developing timely measures of recent drilling activity. This is followed by a discussion of the nature and extent of errors in the raw data files received by EIA. Last, the revised data are presented along with key …