Synopsis

Rig count may be falling, but demand for pressure pumping services has stabilized in the Midcontinent. Unfortunately, stable demand in this instance represents demand at an exceptionally low level.

Operators are just doing what is necessary to finish out program work to complete 2015 budgets. Meanwhile, contractors report that operators have gone back to vertical wells and workovers to keep production levels up. The more expensive horizontal programs have been postponed until commodity prices recover.

Survey respondents pegged regional capacity at 530,000 in hydraulic horsepower (HHP). However, well stimulation firms have been assembling equipment at super-regional yards and dispatching it to multiple regions from these large, centralized locations.

The average per stage price for hydraulic fracturing has fallen to $31,000, which is among the lowest per stage pricing in the domestic market. Recent price reductions have come because of the sharply reduced cost for sand and chemicals that operators have negotiated with suppliers.

Survey respondents insist pricing is at bottom. When operators drill horizontally, they postpone completions. Midcontinent operators need $50 to $60 oil to make verticals economic and as much as $70 oil to make horizontal drilling economically viable.

Operators are looking at refracks but actual demand is low as discussion continues on the best methodologies.

Operators are doing recompletions and acid clean outs to restore production volumes in existing wells. This segment constitutes about 14% of job mix with new fracks accounting for the rest.

Look for the next Midcontinent pressure pumping update in January 2015.

Part I. – Survey Findings

Among Survey Participants:

  • Demand Flat Quarter-To-Quarter In The Region
    [See Question 1a and 1b on Statistical Review]
    ​All respondents reported that demand remains flat quarter-to-quarter because of the low oil price. Some relief was noted by pressure pumping companies as one Big 3 participant moved out of the MidCon. Most respondents expect demand to be stable at current levels until price of oil recovers, hopefully in 2016.
    • Mid-Tier Service Provider: “Demand seems to have stabilized somewhat into current levels into 2016.”
  • HHP Supply Sufficient
    [See Question 2 on Statistical Review]
    ​Four of seven respondents reporting a sufficient supply of HHP capacity but three continue to report excessive supply even as one major frack provider exited the region.
    • Mid-Tier Service Provider: “Most have established a baseline of work to finish out 2015 and are hoping for improved demand in 2016.”
  • Fracking Capacity Reported Averages 533,000 HHP
    [See Question 3a, 3b, and 3c on Statistical Review]
    ​Among respondents, HHP capacity in the region is estimated to range between 400,000 HHP to 750,000 HHP in the play. Most guess 20-25 fleets continue to service the area. While one major provider is reported as leaving the area, there are a high number of idled fleets along with underutilized active fleets as well.
    • Mid-Tier Service Provider: “Prices are at rock bottom for a while now since sand and chemicals came down too…”
  • Dry Gas Well Metrics: Vertical Depth Ranges 6,000-8,500 Feet, Averages ~6,929 Feet; Horizontal Laterals Range 5,000-10,000 Feet, ~5,871-Foot Average
    [See Question 4 on Statistical Review]
    ​Average vertical depth reported is about 6900 feet across the region. Average lateral length is 5,871 feet. Average number of stages is 26. Injection rates average 71 barrels per minute with about six stages completed daily on a 24-hour schedule.
    • Mid-Tier Operator: “We are doing 20 stage fracks in the Mississippi on 5,000-foot laterals. Once in a while we go do a 10,000-foot lateral in the Stack with 50 stages, but those are rare now at this price of oil.”
  • Average Cost Per Stage In Region ~$31,000
    [See Question 5a and 5b on the Statistical Review]
    ​The average per stage price is reported at $31,000. This is lower than the prices estimated in most Texas regions and around the U.S. All respondents expect prices to remain the same over the next three months, and explain that sand and chemical prices have already come down and prices have bottomed out where they will likely stay until oil price rebounds.
    • Mid-Tier Service Provider: “Prices are at bottom now. Many are focused on verticals or workovers to keep production up while delaying more expensive horizontals until recovery.”
  • Delayed Completions Continue In MidCon
    [See Question 6b on the Statistical Review]
    ​Delayed fracks continue as many operators are postponing completing wells until the oil price recovers. One operator explained that vertical wells need $55 or $60 dollar oil to be profitable and horizontals need at least $70 dollar oil. Meanwhile, operators continue to use workovers and are beginning to focus on refracks to sustain production.
    • Top-Tier Operator: “We are still delaying and restricting drilling and completing horizontals due to the [oil] price.”
  • Some Operators Are Beginning To Look To Refrack
    [See Question 7a and 7b on the Statistical Review]
    Several operators have begun looking for refracks to help keep production up with reduced drilling. The move is ramping very slowly. Some recompletion and acid cleanout refrack type work is requested but major refrack work is coming on gradually as design considerations and methodology is still in discussions. Currently 86% of fracking is reported as new frack vs. refrack.

End Survey Findings

Survey Demographics

H A R T E N E R G Y researchers completed interviews with seven industry participants in the well stimulation/pressure pumping service segment in the Midcontinent region. Participants included four managers or sales personnel with well service companies and three completion managers working for E&P companies. Interviews were conducted during the first week of October 2015.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Midcontinent]

Total Respondents = 7

[Fracking Sevice Providers = 4, Operators = 3]

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

Remain the same:

6

Further shrinkage:

1


2. Would you characterize the supply of pressure pumping equipment in your area as excessive, sufficient or insufficient to meet late 2015 demand?

Sufficient:

4

Excessive:

3


3a. How would you estimate total HHP capacity for the region?

Average total HHP:

~ 530,000 HHP active


3b. How many total crews (spreads) do you think are active in the area?

20:

3

20-25:

2

25-30:

2


3c. Have any service providers left the play in the last 90 days?

Yes:

3

Not sure:

4


4. 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:

6,929 feet

Average horizontal lateral length:

5,871 feet

Average number of frack stages:

26

Injection rates (barrels per minute):

71

Average number of frack stages per day:

6

12-hour or 24-hour:

24-hour


5a. What is the average cost per stage in your area now?

$25,000-30,000:

3

$30,000-35,000:

4

Average cost per stage:

~$31,000 per stage*

*Slickwater fracks continue to be common, but crosslink are often used in Stack and Scoop plays at slightly higher costs.


5b. Do you expect frackng prices to increase, remain the same, or decrease over the next three months?

Remain the same (0%):

8


6a. What strategies are companies putting into place to cope with a low price environment?

Negotiating pricing:

2

Delaying drilling and frack jobs:

5


6b. What are you seeing in terms of the number of wells drilled but not completed in your area?

All report many delayed fracks with a continued backlog at present.


7a. In your area, are you seeing a push towards refracking wells?

All report much discussion about refrack but it is ramping slowly.


7b. What percentage of the wells you are working on would be new completions and what percentage would be refracks?

New wells:

86%

Refrack wells:

14%


End Statistical Survey