Synopsis

The downturn in demand for pressure pumping services is in full bloom with an estimated half of the Permian Basin’s installed base of 2.1 million in hydraulic horsepower now idled. Service providers are laying off crews and stacking equipment as demand falls. Pricing has followed suit and now averages $56,000 per stage for plug and perf and $30,000 per stage for sliding sleeves, or about 26% versus last quarter for plug and perf and 30% versus the previous quarter for sliding sleeves. Half of respondents expect pricing to fall farther, although the service companies say pricing is at bottom for pressure pumping services, though some downside may yet remain in bulk materials. Service providers estimated operators are delaying completions on up to half of the wells drilled. Watch for the next Permian Basin well stimulation report in June 2015.

Part I. – Survey Findings

Among Survey Participants:

  • 1Q15 Pressure Pumping Demand Down; Completions Delayed
    [See Question 1a and 1b on Statistical Review]
    ​Four respondents reported that demand is down QTQ, but has now stabilized and four expect more demand erosion. Demand for completions has fallen more than drilling as many wells are now drilled, but completions are delayed.
    • Mid-Tier Service Provider: “We now see up to 50% of the wells drilled delayed on completions until later.”
  • HHP Supply Excessive for the Region
    [See Question 2 on Statistical Review]
    All eight respondents reported that equipment supply is excessive for current completion requirements. Layoffs of personnel and idling of fleets is characterizing the pressure pumping landscape in the Permian Basin.
  • Uncertainty About HHP Capacity Continues
    [See Question 3 on Statistical Review]
    ​Respondents reported hydraulic horsepower (HHP) in the region may be unchanged, but crews are diminishing rapidly due to the slowdown. As a result, respondents were uncertain as to how many total fleets are active in the area. Average hydraulic horsepower was last reported at ~2.1 million HHP and is likely unchanged, but half of that horsepower is now idled and crews have been laid-off.
    • Mid-Tier Service Provider: “We know it will be a fight for survival and market share among providers before this is over. We plan to aggressively retain or even gain market share during this time.”
  • Permian/Bone Springs Well Metrics: Vertical Depth Range 7,000- 9,000-ft, Horizontal Laterals ~9,300-ft.
    [See Question 4 on Statistical Review]
    ​Respondents interviewed mainly worked in the Bone Spring formation (northern Delaware Basin) in the Permian Basin. These sources reported average vertical depth is in a range of 7,000-ft. to 9,000-ft. and horizontal laterals average 9,312-ft. Most respondents reported metrics relative to plug and perf fracks for this report.
    • Completions Consultant: “We continue to see plug and perf as the preferred method across the play. We have also seen the longer laterals with 40 or more stages continue as efficiency of production is even more critical now.”


  • Average Cost Per Stage: ~$56,000 for Plug and Perf; ~$30,000 for Sleeve Frack
    [See Question 5a on the Statistical Review]
    The average per stage price is $56,000 for plug and perf fracs with large sand volumes. Average per stage price using sliding sleeves is $30,000, down 30% from before the slowdown. Operators have re-negotiated all completion costs in the current environment.
    • Mid-Tier Service Provider: “Operators have demanded and received deep concessions for the wells they are currently completing. In spite of the bargain prices, they are still delaying a large number of completions on drilled wells.”
  • Decrease in Prices Expected QTQ
    [See Question 5b on the Statistical Review]
    ​Half of respondents expect prices to remain the same (at bottom) during the next three months. Three respondents expect prices to continue to adjust downward based on material cost reductions in sand, water and acid prices.
    • Mid-Tier Operator: "The prices are bottomed out from the frac company’s perspective, but some commodity prices like sand, acid and water could bring prices down slightly in the next quarter.”
  • Companies Respond to Low Price Environment
    [See Question 6a and 6b on the Statistical Review]
    Operators are demanding and receiving deep price concessions on all completions in order to keep working, but continue to delay many drilled wells’ completion phase. Service providers have responded by laying off employees and idling fleets across the region. Some have estimated as many as 50% of drilled wells are now being delayed on completions until oil price improves.


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 area. Participants included two consultants working for oil and gas operators, one frac supply salesman, and five managers or sales persons with well stimulation companies. Interviews were conducted during the third week of March 2015.

End Survey Findings

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Permian Basin]
Total Respondents = 8
[Completion Consultants = 2, Frack Equipment Suppliers = 1, Frack Service Providers = 5]

1. Do you expect demand for pressure pumping equipment to grow, remain the same or shrink in 1Q15 compared to 4Q14?
Stay the same: 4
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?
Excessive: 8

3. How would you estimate total HHP capacity for the region?
Avg. total HHP among respondents ~2,100,000 HHP*
*The total HHP shown is for equipment; however crews to man frac spreads have been cut by 50%.

4. What is the average vertical drilling depth, average horizontal lateral length, number of frack 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?
Permian Basin
Vertical Depth Range: 7,000-9,000-ft.*
Average Horizontal Lateral Length: 9,312-ft.’**
Average No. of Frack Stages for Sleeves 55-60
Average No. of Frack Stages for P&P 40
Injection rates (barrels/min) for standard 71 bpm
Injection rates (barrels/min) for coil fracs 20 bpm
Average No. of Frack Stages/Day for standard 7
Average No. of Frack Stages/Day for coil fracs 11
12-hr or 24-hr 24-hr
* Respondents gave ranges across the region
**Several respondents gave metrics for Bone Springs wells

5a. What is the average cost per stage in your area now?
Average of Sliding sleeve per stage: $30,000
Average of Plug and Perf per stage: $56,000

5b. Do you expect fraccing service prices to increase, remain the same, or decrease over the next 3 months?
Decrease (no % estimated) 3
Remain the same 4
No estimate 1

6a. What strategies are companies putting into place to cope with a low price environment?
Operators asking and getting price concessions 5
Providers are cutting employees and idling fleets 3

6b. What are you seeing in terms of the number of wells drilled, but not completed in your area?
Operators are delaying many completions (no specific #) 6
Operators are delaying 50% of completions on drilled wells 1
One operator already drilled/cemented 34 wells to be completed later 1