Synopsis

Marcellus well stimulation providers await better gas prices, though winter-time natural gas demand has kept activity steady, albeit at low levels.

Well stimulation providers had a different take than their peers in drilling and well servicing on the commodity price necessary to stimulate demand for services.

While drillers and workover contractors point to oil prices above $50 and $3 natural gas, well stimulation providers expect demand for pressure pumping would improve at $44 oil and $2.78 gas.

Regional pressure pumping capacity eroded with survey participants estimating 731,000 in hydraulic horsepower (HHP) in February vs. 875,000 HHP 90 days ago.

The number of fleets available to work the region also fell from 36 in November 2015 to 30 currently. Otherwise, operators have settled on a standard well recipe that involves 30 to 40 stages on a 7,000 to 8,000-foot lateral.

Price per stage is unchanged since November 2015 at $41,600 on average among survey respondents, although operators are negotiating directly with sand and chemical providers to obtain materials formerly packaged with well stimulation services.

Survey respondents said pricing is not expected to drop further.

Watch for the next Appalachian well stimulation Heard In The Field report in May 2016.

Part I. – Survey Findings

Among Survey Participants:

  • Demand Expected Flat Quarter-To-Quarter
    [See Question 1 on Statistical Review]
    ​Seven of eight respondents reported that demand during the first quarter of 2016 is flat quarter-to-quarter generally because of normal winter demand for natural gas. Most respondents expect demand to remain at the current reduced levels until the price of gas rebounds somewhat.
    • Mid-Tier Service Provider: “Compared to other regions, we at least have steady demand even though it is much less than desired. The demand for natural gas for heating drives winter demand here.”
  • Higher Oil And Gas Prices Needed
    [See Question 2 on Statistical Review]
    ​Among respondents, an average oil price of $44 and average natural gas price of $2.78 would be required to begin to increase demand and get operators increasing their exploration activity.
    • Mid-Tier Service Provider: “These prices have most operators’ budgets for new wells cut to a minimum. We really need to see $40-$50 oil and $3 natural gas to see increased activity again in the region.”
  • Regional Hydraulic Horsepower Estimated At ~731,000 HHP
    [See Question 3 and 4 on Statistical Review]
    Average estimated hydraulic horsepower in the region is nearly 731,000 HHP, somewhat less than the 875,000 HHP estimated in the November report. In addition, about 30 fleets are still available to frack Marcellus and Utica region, down from 36 reported in November.
  • Marcellus Well Metrics: Vertical Depth Ranges ~6,900 Feet
    [See Question 5 on Statistical Review]
    ​Average vertical depth reported at 6,894 feet on average across the play. Average lateral length is 7,375 feet. Average number of stages is 36. Injection rates average 73 barrels per minute with about six stages completed daily on a 24-hour schedule.
    • Mid-Tier Operator: “We are usually doing 30 to 40 stage slick water fracks on 7,000- to 8,000-foot laterals.”
  • Average Cost Per Stage In Region ~$41,600
    [See Question 6 and 7 on the Statistical Review]
    ​The average per stage price is about $41,600, similar to findings in November. Some respondents reported that many operators are negotiating sand and chemicals directly from suppliers. All respondents expect prices to remain the same over the next three months.
    • Mid-Tier Service Provider: “Prices continue to go slightly lower as suppliers have been forced to reduce costs of goods. Prices now seemed to have bottomed and prices should be stable until demand increases.”

End Survey Findings

Survey Demographics

H A R T E N E R G Y researchers completed interviews with eight industry participants in the well stimulation/pressure pumping service segment in the Marcellus region. Participants included seven managers or sales personnel with well service companies, and one technical consultant working for an E&P company. Interviews were conducted during late January and early February.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Marcellus Shale]

Total Respondents = 8

[Fracking service providers = 7, Operators = 1]

1. Do you expect demand for pressure pumping equipment to grow, remain the same or shrink in the first quarter of 2016 compared to fourth-quarter 2015?

Remain the same:

7

Expecting growth:

1


2. What oil price (per barrel) and what natural gas price (per thousand cubic foot) is needed for demand for fracking services to improve?

Oil

Price

# Of Responses

Gas

Price

# Of Responses

$35-$40

4

$2.50

4

$41-$50

3

$2.51-$3

4

$51-$60

1

—

—

Average

$44

—

$2.78


3. In your estimation, what is the total HHP (hydraulic horsepower) in your area? (all providers combined)

750,000 HHP:

5

500,000-1 million HHP:

3

Average among all respondents:

731,000 HHP


4. How many total crews (spreads) do you estimate are active in the area?

25-30:

2

30:

5

30-40:

1

Average estimated:

30 crews


5. What is the average vertical drilling depth, average horizontal lateral length, number of frack stages and injection rates (barrels per minute) in this play? What are the average frack stages per day? Is this a 12-hour or 24-hour shift?

Average vertical depth:

6,894 feet

Average horizontal lateral length:

7,375 feet

Average number of frack stages:

36

Injection rates (barrels per minute):

73

Average number of frack stages per day:

6

12-hour or 24-hour:

24-hour


6. What is the average cost per stage in your area now?

$30,000-$40,000:

5

$40,000-$50,000:

2

$25,000-$80,000:

1

Average cost per stage:

~$41,600 per stage


7. Do you expect fracking prices to increase, remain the same, or decrease over the next three months? By what percent?

Remain the same:

8


End Statistical Survey