Synopsis

Apparently all that rain in May is producing green shoots in the Permian Basin oil patch.

Pricing for well stimulation has started back up on a per stage basis. Although the increase is attributed to greater sand volumes and increased use of linear gel as operators push lateral length in the Delaware Basin.

Indeed, one half of service providers in Hart Energy’s Heard In The Field survey are reporting an increase in both inquiries and work volume due to drilled but uncompleted wells (DUCs).

Operators have started completing the DUC inventory as commodity prices hover just below the $52 West Texas Intermediate threshold that service providers say the industry needs to stimulate activity.

Service providers are completing DUCs in seven days and can reduce that time 10% to 15% when operators move to zipper frack batch completions. Similarly, regional well stimulation capacity reflects rising demand.

Hydraulic horsepower (hhp) has increased as several fleets recently relocated to the Permian from the Eagle Ford Shale.

The move keeps with the recent trend of yard consolidation in the service industry. In the trend, service providers have been relocating equipment and crews into the most active areas and servicing other regions from a multiregional base.

Survey respondents said the number of frack fleets in the Permian increased to 35 with 850,000 hhp in effective capacity vs. 22 crews with 600,000 hhp 90 days ago.

While three of four survey respondents expect pricing to stay flat, the remainder anticipates pricing will move higher over the next 90 days. The outlook is the first indication in 18 months of pricing improvement for well stimulation.

Watch for the next Heard In The Field report on the Permian Basin well stimulation/pressure pumping market in September.

Part I. – Survey Findings

Among Survey Participants:

  • Demand Growing Slightly Quarter-To-Quarter
    [See Question 1 on Statistical Review]
    ​Four of eight respondents reported that second-quarter 2016 pressure pumping demand has grown slightly quarter-to-quarter and the remaining four said demand is the same.
    • Mid-Tier Service Provider: “There should be a gradual increase in demand with fewer completions being pushed off now because of improving [oil] prices.”
  • DUCs Same To Decreasing Quarter-To-Quarter
    [See Question 2 on Statistical Review]
    Seven of eight respondents reported the number of DUCs has remained the same compared with three months ago and one respondent said DUCs have decreased because operators are completing wells after they are drilled.
    • Top-Tier Service Provider: “Few operators are going to delay completions now that prices are improving.”
  • Stable Oil, Gas Prices Needed To Lower DUC Backlog
    Among respondents, a stable average oil price of $52 and average natural gas price of $2.75 would be required before pressure pumping demand would increase.
    Mid-Tier Service Provider: “There are reasons for optimism, but no one wants to hurry and overproduce. Everyone wants the oil price to go up a little more and show stability at the new level.”
  • Time To Complete DUC Well: ~8 Days
    [See Question 4a and 4b on Statistical Review]
    ​Among respondents, time to complete a DUC well averages eight days. Utilizing a multiwell zipper frack approach to those completions can possibly reduce that time per well by as much as 15% per well on a pad.
    • Mid-Tier Service Provider: “We are completing DUC wells in seven to eight days here in the Permian. With zipper frack, we average seven days to frack each well.”
  • Regional hhp Estimates Increase
    [See Question 5 on Statistical Review]
    Average estimated hydraulic horsepower capacity in the region increased to about 850,000 hhp, with about 35 fleets now available to frack in the Permian Basin. In comparison, 600,000 hhp among 22 crews was reported in the March. Several respondents mentioned that many fleets have shifted to the Permian from the Eagle Ford recently.
  • Well Metrics: Vertical Depth Averages 9,813 Feet, Laterals Average 8,688 Feet
    [See Question 5 on Statistical Review]
    Average vertical depth reported is 9,813 feet across the play. Respondents were focused on Wolfcamp wells with some in the Bone Springs, though there has been a movement in 2016 away from Bone Spring toward Wolfcamp targets in the Delaware Basin. Respondents reported the average lateral length at 8,688 feet with an average stage count of 35. Injection rates average 72 barrels per minute with about six stages completed daily on a 24-hour schedule.
  • Average Cost Per Stage: ~$39,000
    [See Question 8 and 9 on the Statistical Review]
    ​The average per stage price is reported at $39,000, up somewhat from the $34,000 reported in March. This likely reflects higher sand volumes used in some of the respondents’ wells. Six of eight respondents expect the cost to frack wells to remain the same over the next three months. However, two are expecting higher costs mainly due to increased sand volumes.
    • Mid-Tier Service Provider: “Costs are increasing slightly with the increased sand volumes and whether or not some linear gel is used.”

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 Permian Basin. Participants included four managers or sales personnel with well service companies, one downhole tools and coil tubing provider and three completions managers or consultants working for E&P companies. Interviews were conducted during early to mid-June 2016.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Permian Basin]

Total Respondents = 8

[Fracking service providers = 4, Downhole suppliers = 1, Operators = 3]

1. Do you expect demand for pressure pumping equipment to grow, remain the same or shrink this quarter compared to last quarter?

Remain the same:

4

Grow:

4


2. Are the number of DUCs increasing, decreasing or remaining the same compared with three months ago?

Remain the same:

7

Slight decrease:

1


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

Oil Price

# Responses

Gas Price

# Responses

$45-$50

4

$2.00-$2.50

4

$55-$60

4

$3

4

Average $52

8

Average $2.75

8


4a. On average in this formation, how long does it take to bring a DUC online?

7 days:

3

8-10 days:

5

Average:

~8 days


4b. Does the time to bring a DUC online differ between wells drilled on a pad vs. a single well?

Yes, time saved is 10% to 15% per well:

8


5. In your estimation, what is the total hhp in your area?

500,000-750,000 hhp:

1

751,000-1 million hhp:

4

Average among all respondents:

850,000 hhp


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

30-35:

4

36-40:

4

Average:

~35 crews


7. 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:

9,813 feet

Average horizontal lateral length:

8,688 feet

Average number of frack stages:

35

Injection rates (barrels per minute):

72

Average number of frack stages per day:

6

12-hour or 24-hour:

24-hour

Capacity needed to frack:

~24,000 hhp*

*One respondent reported coil fracks with sliding sleeve use 15,000 hhp.


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

$30,000-$35,000:

4

$36,000-$40,000:

4

Average cost per stage:

~$39,000 per stage


9. Do you expect fracking costs to increase, remain the same, or decrease over the next three months?

Remain the same:

6

Increase:

2


End Statistical Survey