This report is part of Hart Energy’s proprietary Market Intelligence series. Hart Energy researchers interview industry participants in land drilling, well stimulation, well servicing, and the downhole completion service sectors across the major unconventional plays to bring our subscribers real-time, actionable information direct from the field.

Topic: Niobrara Well Stimulation, 1Q 2015

Synopsis

Operators are pressing pressure pumping service providers for price decreases in the Niobrara Shale while a drop in demand for well stimulation has left the regional pressure pumping fleet in oversupply with contractors looking to rotate equipment out of the Niobrara and into dry gas basins.

Part I. – Survey Findings

Among Survey Participants:

  • Major Slowdown in Niobrara [See Question 1 on Statistical Review]. All eight respondents reported that demand has slowed considerably due to the low price of oil. After current projects are completed, demand will be limited to leasehold-required wells only until price of oil recovers.
    • Mid- Tier Service Provider: “We were excited about the increase of demand in Niobrara until the price drop. We were notified immediately by our clients to expect a slowdown to required wells only until oil price recovers.”
  • HHP Supply Excessive [See Question 2 on Statistical Review]. All respondents agreed there is an oversupply of equipment to meet current needs in the area. The excessive supply will not likely be corrected until demand ramps again when the oil price recovers.
    • Mid-Tier Service Provider: “We know that there is going to be lots of fleets shut down if the price doesn’t recover rapidly. Everyone is scrambling to figure out what is next.”
  • HHP Capacity Estimated at ~1.1 Million [See Question 3 on Statistical Review]. Three respondents estimated HHP capacity in the area to be between 1 million and 1.5 million HHP. This number is relatively unchanged since 3Q 2014, but will change rapidly if the oil price stays below $80. There are already discussions about moving some fleets back to dry gas regions where prices have recovered somewhat.
    • Mid-Tier Service Provider: “I know there will be lots of fleet movement soon if price stays down. Some fleets may move back to dry gas areas, but many will have to shut down.”
  • Niobrara Well Metrics: Vertical Depth ~7,113-ft. and Horizontal Laterals Estimated at ~6,531-ft. [See Question 4 on Statistical Review]. Average vertical depth reported is ~7,113-ft. in the Niobrara with an average of 6,531-ft. of horizontal lateral. Average number of stages is 32. Injection rates average 75 bpm with approximately 6 stages completed daily on a 24-hour schedule.
  • Average Cost Per Stage in Niobrara ~$89,000 [See Question 5a on the Statistical Review]. The average per stage price is down to $89,000 and is expected to decrease over the next three months.
    • Mid-Tier Service Provider: “Producers have already been asking for concessions as prices dropped. Many have told us that they have to find major concessions across the board to have any hope to continue producing new wells.”
  • Decrease in Prices Expected QTQ [See Question 5b on the Statistical Review]. Eight respondents expect prices to decrease during the next three months. All respondents expect a price drop and two mentioned that drop will likely be 10% to 15%.
    • Mid-Sized Operator: "We have already stopped drilling. Prices will have to come down considerably and oil price will have to recover to $80 or more before we drill anything more than leasehold requirements.”

Survey Demographics

Hart Energy researchers completed interviews with eight industry participants in the well stimulation/pressure pumping service segment in the Niobrara shale play. Participants included two oil and gas operators and five managers or sales personnel with well service companies, and one completions consulting group. Interviews were conducted during the second week of January 2015.

Part II. – Statistical Review, Well Stimulation/Pressure Pumping [Focus on Niobrara Shale]

Total Respondents = 8 [Oil and Gas Operators = 2, Frac Service Providers = 5, Frack Consultants = 1]

1. Do you expect demand for pressure pumping equipment to grow, remain the same or shrink in 1Q15 compared to 4Q14?

Shrink: 8

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

Excessive: 8

3a. What is your best estimate of total HHP capacity for the region?

Avg. total HHP among respondents 1,100,000 HHP

3b. Have any new providers entered the play in the last 90 days?

No new providers: 8

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

No: 6

Possibly soon: 2

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

Niobrara

Average Vertical Depth: 7,113-ft

Average Horizontal Lateral Length: 6,531-ft.

Average No. of Frack Stages: 32

Injection rates (barrels/min): 75 bpm

Average No. of Frack Stages/Day: 6

12-hr or 24-hr: 24-hr (8 of 8)

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

No response: 1

$75,000- $80,000: 2

$90,000 to $100,000: 5

Average cost per stage: $89,000 per stage*

*This is approximately 12% less than reported in 3Q 2014

5b. Do you expect fracking prices to increase, remain the same, or decrease over the next 3 months?

Decrease (no % given): 6

Decrease 10% to 15%: 2