- Lateral length grew 14% in 2016.
- Stages per well rose 34%.
- Proppant per lateral foot rose 50% to 1,740 lb.
- Batch completions are back.
Outlined against the blue-gray sky of the worst business setback in a generation, the four horsemen of oil and gas completion shed their seals and rode again.
Though originally known as Famine, Pestilence, Destruction and Death, to paraphrase the legendary sportswriter Grantland Rice, those are aliases. The real names of completion advancement are encapsulated in crowd-sourced stats and include longer laterals, more stages per well, greater proppant loading and a return to batch completions.
The truth is the oil and gas industry emerges from every downturn in an entirely different structure than what existed before, whether it was the move to natural gas offshore after 1992 or the return to conventional gas drilling onshore to meet rapidly rising consumer demand post-1999. That was succeeded by the switch to tight formation exploitation coming out of the 2002 downturn followed by widespread adoption of horizontal drilling and multistage fracturing in tight formation plays, first for gas, then liquids, in the post-2009 recovery.
Beset by a cyclone of the worst commodity prices in a generation, E&P companies embraced capital efficiency via largely homogenized completion strategies and are riding toward recovery as crowd-sourced metrics confirm surprising changes in tight formation completions.
The first horse of completion is longer laterals. Lateral length grew 14% in 2016, according to respondents in Hart Energy’s Heard in the Field surveys, as E&P companies consolidated acreage into drilling units that allowed the horizontal drillbit to move beyond the previous standard of 1,372 m (4,500 ft) per section. Crowd-sourced metrics show average lateral length exceeding 2,530 m (8,300 ft) on average at year-end 2016: fewer wells in 2016 but longer laterals.
While lateral length reduced the cost of reservoir access vs. drilling additional wells, it took the second horseman, the number of stages per well, to fully exploit the opportunity. Stages per well rose 34% to 41 on average across the tight formation plays in 2016 as E&P companies sought greater access to hydrocarbon-bearing formations. Consequently, spacing between stages, which extended more than 76 m (250 ft) three years ago, now averages less than 61 m (200 ft).
Those spacing reductions opened a pathway for the third horse of completion, which is greater proppant loading. A sharp increase in proppant volume in fourth-quarter 2016 boosted the average proppant per lateral foot in tight formations 50% to 1,740 lb year-over-year. That’s material. Average proppant per lateral also soared in 2016, finishing 2016 up 72% to an average 14.56 million pounds. Think of it as sand by the trainload.
The final horse rode forth in 2017. This is the return to batch completions. Batch completions bottomed at less than 44% of all horizontal wells one year ago as the industry faced a cyclone of rapidly declining commodity prices and allowed inventory to build as drilled but uncompleted wells (DUCs). The industry exited 2016 at about 48% of horizontal wells completed in batches. However, batch completions surged to two-thirds or more of wells regionally during the first six weeks of 2017 as E&P companies were comfortable enough with commodity prices to tackle the backlog of DUCs in a $50 oil environment.
Batch completions help E&P companies squeeze more goodie out of adjacent wells and allow contractors to expand margins by capturing wellsite efficiencies. If both sectors benefit, then the industry will see a full and complete economic recovery.
Will the four horsemen be enough? The narrative in first-quarter 2017 is that E&P companies are accelerating capital spending. The industry will know mid-year whether surging domestic production creates another commodity price pause or whether declining global inventories encourage E&P companies to gallop forward.