Synopsis

The backlog of drilled but uncompleted Eagle Ford wells now exceeds 1,000 as operators defer completions until clarity arrives on oil prices. Average price per stage for well stimulation work fell to $47,000 versus the $69,000 reported in the March 2015 survey. Survey respondents peg regional pressure pumping capacity at 1.27 million hydraulic horsepower (HHP). However, nearly half of the region’s pressure pumping crews have been let go. Operators are employing several strategies to navigate the low price environment, including purchasing sand and other downhole chemicals direct from buyers, purchasing bundled services from providers in a single package, or delaying fracture stimulation. Watch for the next Eagle Ford pressure pumping update in September 2015.

Part I. – Survey Findings

Among Survey Participants:

  • Pressure Pumping Demand Stabilizing at Low Levels, Completion Backlog Looms
    [See Question 1a and 1b on Statistical Review]
    ​All respondents reported that demand for pressure pumping services stabilized QTQ and supply of equipment and crews is adjusting downward to meet reduced demand. However, demand is expected to outpace supply quickly if oil prices improve. All service providers reported that approximately 50% of wells drilled are not being completed, which is building a backlog of potential frack jobs in the future.
    • Mid-Tier Service Provider: “The operators moved quickly to delay frack jobs. Half of drilled wells are not completed now.”
  • HHP Supply Excessive for the Region
    [See Question 2 on Statistical Review]
    Half of service providers interviewed reported that the hydraulic horsepower (HHP) pressure pumping equipment in the region is excessive compared to the rate of completions.
  • HHP Capacity Stands at ~1.27 Million, but Crews Laid-Off
    [See Question 3 on Statistical Review]
    Respondents reported as many as 50% of fleets in Eagle Ford are idled, but equipment is still in the area. Estimates range from 1 million to 1.5 million HHP active in the play. Crews have been laid-off, however, and about half of that equipment is not active.
    • Mid-Tier Service Provider: “Half of crews are gone. There is also a major backlog of fracks for the future. We have more than 1,000 unfracked wells across the Eagle Ford and 4,000 nationwide. When the oil price recovers, there will be a problem ramping back up fast enough.”
  • Eagle Ford Well Metrics: Vertical Depth ~9,250-ft, Horizontal Laterals ~7,312-ft.
    [See Question 4 on Statistical Review]
    ​Average vertical depth reported among respondents was 9,156 feet; average horizontal lateral length was 7,312 feet. Average number of stages is 26 with 250-foot to 300-foot spacing on stages. Injection rates average 59 barrels per minute with about six stages completed daily on a 24-hour schedule. Huge sand volumes continue to be used in completions with 100 mesh the dominant proppant. An average Eagle Ford well requires about 22,000 HHP to frack. However, a few respondents said some operators are requesting lower HHP to frack wells in an effort to reduce costs.
    • Top Tier Service Provider: “No real changes in methods have occurred. Fewer completions are happening, but they continue to look the same.”
  • Average Cost Per Stage Down to ~$47,000
    [See Question 5a on the Statistical Review]
    ​The average per stage price is $47,000 and is expected to remain flat for the remainder of the quarter. The amount of proppant used will likely remain the same, but many operators are buying the sand and chemicals directly from suppliers to remove the mark-up involved in frack pricing.
    • Frack Manager: “We are pricing higher than the average right now at what we consider break-even pricing. We refuse to buy market share with losses. We know many competitors are working at a loss to keep it going.”
  • Flat Prices Expected QTQ
    [See Question 5b on the Statistical Review]
    ​All respondents expect prices to remain flat during the next three months. Operators have cut almost everything possible to lower prices and pricing is seemingly at the “bottom”.
    • Mid-Tier Service Provider: "Prices are now below break- even. We expect prices to stabilize here until price of oil recovers.”
  • Pricing Negotiations Continue Along With Delayed Completions
    [See Question 6a and 6b on the Statistical Review]
    Survey respondents reported a move to more slickwater and less linear gel, primarily as a cost saving measure. Most concessions have come by re-negotiating prices of services and materials. There also is a trend by many operators to slow completions and allow the backlog of drilled but unfracked wells to grow. All respondents acknowledge there is a growing backlog of wells to be fracked, which will bode well for future demand when the oil price recovers.

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 Eagle Ford Shale area. Participants included eight managers or sales personnel with well service companies. Interviews were conducted during mid June 2015.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Eagle Ford Shale]

Total Respondents = 8

[Frac Service Providers = 8]

1. Do you expect demand for pressure pumping equipment to grow, remain the same or shrink in third-quarter 2015 compared to second quarter?
Remain the same: 7
Grow: 1

2. Would you characterize the supply of pressure pumping equipment in your area as excessive, sufficient or insufficient to meet early 2015 demand?
Sufficient: 4
Excessive: 4

3. How would you estimate total HHP capacity for the region?
Avg. total HHP among respondents 1,270,000* HHP
*Most acknowledge that the horsepower remains in the Eagle Ford, but 40% to 50% of crews have been cut back or laid off so many fleets are idle.

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 frack stages per day? Is this a 12-hour or 24-hour shift?
Eagle Ford Shale
Average Vertical Depth 9,250-ft.
Average Horizontal Lateral Length 7,312-ft.
Average No. of Frack Stages 26
Injection rates (barrels/min) 59
Average No. of Frack Stages/Day 6
12-hr or 24-hr 24-hr
Average HHP required to frack a well ~22,000 HHP*
*Six respondents said HHP is the same as last quarter, but two said some frack jobs are using less HHP to save costs

5a. What is the average cost per stage in your area now?
$25,000-$32,000 1
$35,000-$50,000 6
$71,000-$75,000 1
Average cost per stage: $47,000 per stage*
*Cost per stage is 40-50% lower by most all respondents, representing the declining cost of goods as well as operators buying chemicals and sand direct

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?
Operators buying sand and chemicals direct: 3
Concessions and bundling: 2
Delaying fracks: 3

6b. What are you seeing in terms of the number of wells drilled, but not completed in your area?
Most respondents acknowledge that companies are drilling 50% more wells than they are fracking and backlog is growing. Respondents estimate there is a backlog of more than 1,000 unfracked wells in the area.

End Statistical Review