Synopsis

The drop in commodity prices is forcing operators to re-examine efficiency in drilling and completion. Of note, while operators discussed specific tools, the greatest contribution to better performance involves mastering process, such as pad drilling and enhanced completions. Emerging technologies of note among operators include greater use of high efficiency downhole motors for drilling and the nascent use of coil tubing and sliding sleeves for pinpoint stage stimulation in completions. Operators report completion costs average 60% of well costs while drilling has fallen to 20% of well costs.

Watch for results from the next special topic survey in February 2015.

Part I. – Survey Findings

Among Survey Participants:

  • Low Oil Price Drives Demand For Efficiency [See Question 1 on Statistical Review]. All eight respondents report that the current oil price is driving a new demand for efficiency. Any technology that cuts cost is being incorporated into the Completions Phase. Respondents cited three key technologies across all phases, those these technologies are not necessarily new, including pad drilling, high efficiency mud motors, and enhanced completions. Better well planning from early seismic/geological phases through the completion stage was the main avenue toward cost savings for some respondents. In addition, respondents mentioned that renegotiating contracts and better logistical planning is shaving cost.
    • Permian Basin Operator: “I use a drilling consulting group from Canada and their downhole mud motors to reduce drilling time substantially. I also use coil fracks and sleeves to raise my production efficiency with approximately the same dollars spent on the frack.”
    • Geological Engineer Consultant: “I believe it starts with better data for the well from the beginning. I believe we can design a better well from drilling to completions with better data. I then think we focus on cost per barrel, not cost per well. We need better wells not just more wells. Lower cost fracks often get less production. Gel fracks with ceramics may cost more, but increasing long term production by 25% will lower the cost per barrel produced.”
  • All Efficiency Efforts Are Already Underway [See Question 2 on Statistical Review]. All respondents report that these efficiency methods have been implemented already and that improving efficiency is the main focus. There are no mentions of waiting to implement a new technology on the horizon.
    • Marcellus Service Provider: “We are seeing a very demanding focus on efficiency of service. There is little tolerance for sloppy work. Operators are expecting impeccable service from advance planning and logistics to swift implementation. There is a three strikes policy in force and only the best will be accepted. We see well-planned logistics, high sand volumes for better production, zipper fracks on multi-well pads all driving efficiency. Keeping costs low and production high is the expectation now.”
  • Pad Drilling ~20% of Well Costs, Enhanced Completions ~60% [See Question 3 on Statistical Review]. Drilling on pads is estimated at 20% of total well cost and there remains an emphasis on using high efficiency downhole motors (~2% of well costs) in the drilling phase. Meanwhile, enhanced completions average 60% of total well costs. In the completions phase, higher sand volumes were mentioned most often as driving efficiencies along with coiled frack completions.
    • Rocky Mountains Producer: “We can use good planning and efficient drilling and completions to help us save 20-25% and we will keep pushing for better efficiencies, but sub $50 oil is definitely slowing the industry. We will remain in slowdown mode until prices recover.”
    • Permian Basin Producer: “We are currently using a consulting group that has great results on our drilling side. We also have raised our production numbers with the precision of the coil fracs and sleeved completions system. We are also renegotiating prices to get vendors to make concessions. It will take all of these measures to keep drilling alive in this market.”
  • Pad Drilling, High Efficiency Mud Motors Help Overall Well Costs [Question 4 on Report]. Pad drilling is commonly reported as saving up to 10% of drilling costs per well. High efficiency downhole mud motors are also credited with huge reductions in drilling time required per well, saving an additional 10% to 20% of drilling costs by helping reduce the number of drilling days. In the completions phase, technologies currently being utilized do not necessarily add up to upfront costs savings. However, these technologies raise initial production and estimated ultimate recovery, which contributes to a lower cost per barrel of oil.
    • Bakken Consultant: “We see our clients wisely focused on price per barrel of production rather than cost per well. We may use methods that cost more per well, but our average well produces 25% more than nearby wells with cheaper completions. We also produce less water through understanding the geology better. We should save everywhere we can by negotiating prices better, but cheaper technologies may not produce cheaper oil per barrel.”

Anecdotal Comments from Respondents:

  • “By far the biggest savings at present is coming from re-negotiating prices with vendors. Most producers are hopeful of getting overall costs down 15% to 20%.”
  • “It is important to realize that half of all stages installed in the last 5 years don't produce. This represents lots of waste. We must have an extremely effective method of knowing the results of every fracture stimulated stage.”
  • “We have seen drillers cut 10% to 15% off of total drilling time by using the right downhole motors and service vendor.”
  • “We have quit drilling and are only operating drilled wells at present. We have participated with others in Niobrara wells (JV) but even that is slowing to holding acreage only until prices line out and recover.”

Survey Demographics

Hart Energy researchers completed interviews with eight industry participants in the drilling and completions market, including two service providers (1-driller, 1-completion company), three consultants who consult for operators and three oil and gas operators. Interviews were conducted during early January 2015 in four key plays, including the Marcellus, Permian Basin, Niobrara, and Bakken.

Part II. – Statistical Review Technologies Aimed at Efficiency [U.S. Market]

Total Respondents = 8 [Oil and Gas Operators = 3, Consultants = 3, Service Providers = 2]

1. What new technologies are you testing/observing that will increase efficiency and save costs in 2015?

Seismic/Geological Phase:

Efficiency gain through better advanced planning: 2

Better well design based on pre-drill logging/data: 1

Drilling Phase:

Pad drilling: 3

High efficiency mud motors: 2

Completion Phase:

Enhanced completions (high sand volume etc): 3

Zipper fracks: 2

Mongoose or coiled frack sleeved system: 2

Gel fracks (one with high sand/one with ceramics): 2

2. Have you implemented this technology yet into your well work? If not, when do you plan to?

*All of these measures have been implemented already. There were no mentions of new technology not yet implemented in the field.

3. What percentage of total well costs does this technology play?*

Pad drilling: 20%

Enhanced completions: 60%

High efficiency mud motors: 2%

Coiled fracs w/sleeves: 65%

*Not all technologies were estimated by respondents

4. Could you give a ballpark estimate of how much you will save by utilizing this technology?

Pad drilling: 10% of drilling phase costs

High efficiency mud motors: 15% of drilling phase costs

Enhanced completions: None (no upfront savings)*

Coil fracks w/sleeves: None (no upfront savings)*

*Higher production will help reduce costs per barrel, but not necessarily result in a reduction of costs per well.