Synopsis

Well stimulation service providers note the upper Marcellus remains the most active market in the current pricing environment because of cost advantages. Meanwhile, activity in the lower Marcellus and Utica has slowed.

Regional effective capacity remains under 1 million in hydraulic horsepower (HHP) with about 35 crews active in the region. Both fleet and crews remain underutilized. About half of regional fleet capacity remains stacked.

Service providers see demand for well stimulation services as stable through the first half of 2016.

Survey respondents list the cost per stage at $40,000, essentially unchanged in the last 90 days, and reportedly at or near cash cost and ultimately unsustainable.

The backlog of drilled but uncompleted wells continues to grow in Appalachia and operators are not expected to address the inventory until 2016.

New well drilling represents more than 95% of regional well stimulation activity. There is a lot of discussion regionally on refracking wells but not much movement on the process.

Watch for the next Appalachian well stimulation report in February 2016.

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 for pressure pumping services remains flat quarter-to-quarter because of the low gas price. Service companies reported that frack work in the Marcellus is more active than Utica during the downturn. Most respondents expect demand to be stable at current levels until the price of oil and gas recovers.
    • Mid-Tier Service Provider: “Since 2015 budgets are stable through end of year, we expect demand to remain stable at current levels until at least the second quarter of 2016.”
  • HHP Supply Sufficient
    [See Question 2 on Statistical Review]
    ​Four of eight respondents reported a sufficient supply of HHP capacity is in the area, but four reported excessive supply continues to exist.
    • Mid-Tier Service Provider: “We have seen most providers park half or more of their fleets, but no one seems to be pulling out of the region, so there is still an oversupply.”
  • Estimated Fracking Capacity ~875,000 HHP Active
    [See Question 3a, 3b, and 3c on Statistical Review]
    ​Among respondents, active HHP capacity in the region is estimated to range between 500,000 HHP to 1 million HHP, similar to responses made in the August report. Average HHP capacity is estimated at an average 875,000 HHP. Total active fleets are estimated at 36 in the area. While no 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: “There are still 30-35 fleets active in the region, despite being underutilized.”
  • Marcellus Well Metrics: Vertical Depth Averages 6,912-Feet, Horizontal Laterals Average 6,750 Feet
    [See Question 4 on Statistical Review]
    ​Average vertical depth reported is 6,912 feet across the region. Average lateral length is 6,750 feet. Both are similar to findings in the August report. Average number of stages is 38. Injection rates average 74 barrels per minute with about six stages completed daily on a 24-hour schedule.
    • Mid-Tier Operator: “The upper Marcellus wells are most active currently since they are less expensive to drill and complete than the lower Marcellus or Utica wells.”
  • Average Cost Per Stage: ~$40,000
    [See Question 5a and 5b on the Statistical Review]
    ​The average per stage price is reported at $40,000, similar to the findings in the August report. All respondents expect prices to remain the same over the next three months as they are very low currently.
    • Mid-Tier Service Provider: “Prices are too low now. Many are focused on surviving these prices awhile longer until the oversupply disappears and prices rise.”
  • Backlog of Delayed Completions Building
    [See Question 6b on the Statistical Review]
    ​All respondents reported that a backlog of delayed completions is building. The slower pace of drilling and completing wells continues, but the backlog of wells needing to be completed has yet to be addressed.
    • Top-Tier Operator: “We are still seeing a slow pace for drilling and completing wells. We expect that operators will soon begin to address the backlog and increase pace of completions, but likely not until 2016.”

End Survey Findings

Survey Demographics

H A R T E N E R G Y researchers completed interviews with eight industry participants in the pressure pumping segment in the Marcellus region. Participants included seven sales professionals with well service companies and one completions manager for an E&P company. Interviews were conducted during late October 2015.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Marcellus]

Total Respondents = 8

[Fracking Sevice Providers = 7, Operators = 1]

1. Do you expect demand for pressure pumping equipment to grow, remain the same or shrink in the fourth quarter of 2015 compared to third 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 much total HHP capacity do you estimate is in the region?

Average total HHP:

~875,000 HHP active


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

25-30:

2

30-40:

6

Average among respondents:

36


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

No:

6

Not sure:

2


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

Average Vertical Depth:

6,912 feet

Average Horizontal Lateral Length:

6,750 feet

Average Number Frack Stages:

38

Injection rates (barrels per min):

74 bpm

Average Number Frack Stages/Day:

6

12-hour or 24-hour:

24-hour


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

$30,000-40,000:

5

$40,000-60,000:

3

Average cost per stage:

~$40,000 per stage*

*Slickwater fracks continue to be most common reported in Marcellus.


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:

3

Delaying drilling and frack jobs:

3

Lower cost slickwater fracks:

2


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

All respondents report many delayed fracks with backlogs building.


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

All respondents 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:

94%

Refrack wells:

6%


End Statistical Survey