Survey Demographics

Hart Energy researchers completed interviews with nine industry participants in the well stimulation/pressure pumping service segment in the Permian Basin area. Participants included two consultants working for oil and gas operators, one coiled tubing completions specialist, one frack equipment supplier, two oil and gas operators, and three managers or sales persons with well service companies. Interviews were conducted during the second week of December 2014.

Part I. – Survey Findings

Among Survey Participants:

  • 1Q15 Demand Expected to Remain Stable, then Follow Oil Price Up or Down [See Question 1a and 1b on Statistical Review]. Five of nine respondents reported that demand looks stable for 1Q15 in the Permian Basin due to commitments made before the fall in the price of oil. However, four respondents reported demand has already slowed and all agreed that demand will follow price of oil up or down in the new year.
    • Mid-Tier Service Provider: “We have had our key accounts confirm work for the first quarter, but everyone has their eye on oil price at this point.”
  • HHP Supply Sufficient for the Region [See Question 2 on Statistical Review]. Seven of nine respondents reported that supply is sufficient but two reported oversupply has become an issue.
    • Top-Tier Service Provider: “Pressure pumping supply was sufficient before the slowdown started, but any slowdown puts us into oversupply immediately.”
  • Uncertainty About HHP Capacity As Slowdown Begins [See Question 3 on Statistical Review]. Respondents report less hydraulic horsepower (HHP) since last report. Average hydraulic horsepower now reported at ~2.1 million HHP, considerably less than last report. This lower estimate is likely a result of respondents’ pessimistic outlooks rather than fleet movements.
    • Mid-Tier Service Provider: “We have nine fleets in the play and were in the process of adding the tenth before price drop. I am sure we will wait and see how the first quarter goes in 2015.”
  • Permian/Wolfcamp Well Metrics: Vertical Depth Range 7000- 9,000-ft, Horizontal Laterals ~7,500-ft. [See Question 4 on Statistical Review]. Respondents working mainly in the Wolfcamp formation in the Permian Basin reported that average vertical depth is in a range of 7,000-ft. to 9,000-ft. and horizontal laterals average 7,500-ft. There is a growing use of a newer style sliding sleeve coil tubing frack in the Permian Basin that many operators are now trying in order to test for production efficiency. Therefore, metrics listed in the Statistical Review show statistics for both plug and perf and sliding sleeve fracks.
    • Coil Tubing Consultant: “We continue to see operators requesting our coil units for frack jobs using the sleeve system because they can verify the fracture action and proppant distribution on every stage during the frack process resulting in efficiency gains above 20%.”
  • Average Cost Per Stage: ~$76,000 for Plug and Perf; ~$43,000 for Sleeve Frack [See Question 5a on the Statistical Review]. The average per-stage price is $76,000 for plug and perf fracks with the large sand volumes. Average per stage price for sliding sleeve stages is $43,000, but each lateral has two to three times the number of stages compared to a plug and perf. If production data continues to show 20% efficiency gains with this system, sleeves will continue to grow in popularity.
    • Mid-Tier Service Provider: “There are several differences between the two styles of frack now. With coil fracks using sleeves, we use less HHP during the frack since we pump at 30-35 bpm instead of 70 bpm. We also save on drill-out costs since there are no plugs to drill. Sand volume overall for the lateral remains about the same with either system so when all things are considered the sleeve job is only slightly more expensive, but gets far better production.”
  • Decrease in Prices Expected QTQ [See Question 5b on the Statistical Review]. All respondents expect prices to decrease during the next three months. In addition, all respondents expect prices to continue to adjust based on how the oil price fares in the next quarter.
    • Mid-Tier Operator: "The prices will have to be adjusted by all the service providers in order to keep working. We will all have to share the sacrifice and work on thinner margins until the oil price rebounds.”

Part II. – Statistical Review, Well Stimulation/Pressure Pumping

Total Respondents = 9 [Completion Consultants= 2, E&P Companies = 2, Coil Tubing Specialist = 1, Frack Equipment Suppliers = 1, Frack Service Providers = 3]

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

Stay the same: 5

Expect to shrink: 4

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

Sufficient: 7

Oversupply: 2

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

Avg. total HHP among respondents: ~2,100,000 HHP*

*This number is lower than last quarter and may show pessimism rather than actual fleet movement.

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 frac stages per day? Is this a 12-hour or 24-hour shift? 5a. What is the average cost per stage in your area now?

Average of Sliding sleeve stages: $43,000

Average of Plug and Perf stages: $76,000

Average cost per well using sliding sleeves: $2.8 million*

Average cost per well using plug & perf: $2.4 million*

*Cost per well is reporting average cost per stage times average # of stages

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

Decrease (no % estimated): 8

Remain the same: 1