Synopsis

Unlike counterparts in the drilling and workover segments, Permian Basin well stimulation firms say activity has flattened and does not appear to be getting weaker despite July’s drop in oil prices.

The region’s well stimulation fleet has stabilized at about 1.18 million in hydraulic horsepower (HHP) though most crews are underutilized in the current environment.

This report is weighted more towards the Delaware Basin and the Wolfcamp B and Bone Spring formations where operators are using extended laterals as part of an enhanced completion program. Those laterals extend more than 7,500 and average 22 stages for plug and perf and 46 for coil tubing conveyed well stimulation.

Operators have been able to self-source sand and chemicals for well stimulation though most cost savings have been captured.

Survey respondents reported the average cost per stage on plug and perf at $50,000, down from $56,000 in June. Meanwhile, coil tubing conveyed fracture stimulation pricing remains flat at $32,000 per stage.

The volume of drilled but uncompleted wells is falling, partly because operators have slowed drilling volume to a pace that enables them to work through the prior backlog of uncompleted wells.

Watch for the next Permian Basin pressure pumping report in December 2015.

Part I. – Survey Findings

Among Survey Participants:

  • Demand Flat Quarter-To-Quarter In The Region
    [See Question 1a and 1b on Statistical Review]
    ​Nearly all respondents reported that demand remains flat quarter-to-quarter because of the low oil price. Every respondent expects demand will be flat until 2016.
    • Mid-Tier Service Provider: “Demand has bottomed out, but should stay at current levels until recovery since most major players have found a level to exist at these prices.”
  • HHP Supply Continues To Be Excessive
    [See Question 2 on Statistical Review]
    ​Four respondents agreed there continues to be an excessive supply of HHP capacity even though many fleets have been idled, similar to findings in the June report. However, four respondents reported supply was sufficient to meet current demand.
    • Mid-Tier Service Provider: “Most of us service providers have idled fleets and are down to minimal fleets operating until things pick up so there is kind of a balance at present.”
  • Fracking Capacity Estimated To Be ~1.18 Million HHP
    [See Question 3a, 3b, and 3c on Statistical Review]
    ​HHP capacity in the region is averaging about 1.18 million, similar to findings in June, with respondents estimating capacity in a range between 1- to 1.5 million HHP. While there were no providers reported as leaving the area, the number of active fleets has also stabilized in the last quarter.
    • Mid-Tier Service Provider: “Many mid-tier companies have several fleets active, but all are underutilized now even though there may be fewer delayed fracks as many are trying not to add to the backlog.”
  • Permian Well Metrics: Vertical Depth Range 7,000-8,500 Feet; Horizontal Laterals ~7,938 Feet
    [See Question 4 on Statistical Review]
    ​Average vertical range reported is 7,000- to 8,500 feet in the Permian with an average of 7,938 feet of horizontal lateral, mainly for wells in the Wolfcamp B and Bone Spring formations. Average number of stages is 22 for plug and perf and 46 for sliding sleeves. Injection rates average 69 barrels per minute with about six stages completed daily on a 24-hour schedule for plug and perf and 23 barrels per minute with 10 stages completed daily with sleeves.
    • Mid Tier Operator: “We have been averaging 7,900-foot laterals in the Wolfcamp B that are showing great production numbers now with the enhanced completions we use. Wolfcamp and Bone Spring wells average 1,000 boe/d with current completions.”
  • Average Cost Per Stage In Permian ~$50,000 For Plug And Perf
    [See Question 5a and 5b on the Statistical Review]
    ​The average per stage price is reported at $50,000 for plug and perf completions, somewhat less than the $56,000 reported in June, mainly on lower materials costs. However, sliding sleeve fracks are averaging about $32,000 per stage, similar to June findings. Most respondents expect prices to remain flat until 2016.
    • Mid-Tier Service Provider: “Prices are at bottom now as even sand and chemical prices have hit bottom and stabilized.”
  • Some Operators Buying Frack Materials Direct
    [See Question 6a on the Statistical Review]
    Some operators have begun buying sand and chemicals direct as another way of saving bottom-line well costs and many continue to negotiate with fracking providers to lower service pricing. However, the general consensus among respondents is that pricing has not changed much this quarter and continues to be at or very near bottom.
  • Delayed Completions Slowing In Permian
    [See Question 6b on the Statistical Review]
    ​In a change from the June report, several respondents said that delayed fracks jobs are decreasing in the area as many operators are avoiding adding to the backlog of unfracked wells. Drilling has slowed to a level that many are now fracking as wells are drilled. Meanwhile, operators continue to benefit from production efficiencies that have kept wells producing during the oil price slump.
    • Top-Tier Operator: “We are still restricting drilling and completions due to the [oil] price. However, we are currently completing more than we are drilling in order to reduce our backlog of completions.”

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 six managers or sales personnel with well service companies, and two completion consultants working for E&P companies. Interviews were conducted during the first week of September 2015.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping


[Permian Basin]

Total Respondents = 8

[Fracking Sevice Providers = 6, Completions Consultants for Operators = 2]

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:

8


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:

4


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

Average total HHP:

~ 1.18 million active


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

30-40:

8


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

No:

8


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 range:

7,000-8,500 feet

Average horizontal lateral length:

7,938 feet

Average number of frack stages:

22 PP*/ 46 SS**

Injection rates (barrels per minute):

65 bpm PP/23 bpm SS

Average number of frack stages/day:

6 PP/10 SS

12-hour or 24-hour:

24-hour

*Plug and perf

**Sliding sleeve


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

$32,000-35,000*:

3

$40,000-60,000:

5

Average cost per stage:

~$50,000 per stage*

*Plug and perf fracks were reported to be $40,000-60,000, but three respondents reported prices in the $30,000-35,000 range, which is typical for sliding sleeve stages.


5b. Do you expect fracking 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, buying sand and chemicals direct:

6

No response:

2


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

Still many delayed fracks:

4

Completion delays are decreasing:

3*

Our current backlog is 70 unfracked wells:

1

*Some respondents reported completion delays are decreasing as some operators are working to reduce their backlog.


End Statistical Survey