Small Midcontinent Pressure Pumpers Hit Hard

Synopsis

Demand for well stimulation services has stabilized in the Midcontinent and is not expected to change materially in the next 90 days, according to participants in Hart Energy’s Heard in the Field survey program. Respondents are reluctant to pinpoint regional well stimulation capacity because of continuing change in market dynamics. That said, it appears pressure pumping capacity, as measured by hydraulic horsepower (HHP), is 650,000 HHP in July compared to more than 1 million HHP at the beginning of the year. Smaller well stimulation providers are going out of business or have been acquired. Bigger operations are moving crews and equipment to other markets when possible. Operators have leaned hard on service providers to reduce costs and are using the opportunity to add more sand to horizontal wells to good effect, particularly in the upper Woodford Shale. Watch for the next Midcontinent pressure pumping report in October 2015.

Part I. – Survey Findings

Among Survey Participants:

• Third-Quarter 2015 Demand Expected To Remain Flat
  [See Question 1a and 1b on Statistical Review]
  ​All respondents reported that demand is flat quarter-to-quarter though many fleets have left the area. Meanwhile, delayed fracks are slowing even though the oil price has fallen below $60.
  • Mid-Tier Service Provider: “We may see flat demand for another quarter.”

• HHP Supply Sufficient For The Region
  [See Question 2 on Statistical Review]
  ​All respondents reported that supply is sufficient for current demand. Departing fleets have left remaining fleets able to serve current demand.
  • Top-Tier Service Provider: “Pressure pumping supply has stabilized with so many smaller companies leaving.”

• Uncertainty About HHP Capacity Continues
  [See Question 3 on Statistical Review]
  Respondents report hydraulic horsepower (HHP) in the region has dropped, but exact numbers are hard to estimate. A few respondents estimated average hydraulic horsepower in the area at 600,000 HHP to 700,000 HHP.
  • Mid-Tier Service Provider: “We now are focused on this area to gain market share.”

• Woodford Well Metrics: Vertical Depth Range 7,000-12,000 Feet, Horizontal Laterals ~6,062 Feet
  [See Question 4 on Statistical Review]
  Respondents working mainly in the Woodford shale formation in the Midcontinent area reported that average vertical depth is in a range of 7,000 feet to 10,000 feet and horizontal laterals average 6,062 feet. Three respondents said they are using sliding sleeve coil fracks and five are using plug and perf fracks. A few respondents acknowledged some clients are using sliding sleeves too.

• Average Cost Per Stage: $20,000
  [See Question 5a on the Statistical Review]
  ​The range of per stage price mentioned by respondents was $15,000 to $40,000 with the average being $20,000 for plug and perf fracks with large sand volumes. This price is indicative of more use of less expensive slickwater. However, some are using a 40-60 stage frack design on 10,000-foot laterals with a million pounds of sand per stage, costing around $40,000 per stage.
  • Mid-Tier Service Provider: “Operators have demanded and received deep concessions to save money. Others are taking advantage of the cheap prices to do really exorbitant amounts of proppant in the upper Woodford with good results.”

• No Increase In Prices Expected Quarter-To-Quarter
  [See Question 5b on the Statistical Review]
  ​All respondents expect prices to remain flat during the next three months. Oil prices less than $60 is considered the main cause for flat demand and pricing remaining flat.
  • Mid-Tier Service Provider: "The prices are bottomed out from the frack company’s perspective, but oil keeps resisting the needed rise in price. We really need for oil to get back above $70.”

• Companies Respond To Low Price Environment
  [See Question 6a and 6b on the Statistical Review]
  Operators have controlled prices well and cut costs to rock bottom, but there are some who believe it can go lower or remain this low for a long period of time.

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 Midcontinent area. Participants included one frack supply company representative and seven managers or sales persons with well service companies. Interviews were conducted during the third week of July 2015.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Midcontinent]

Total Respondents = 8

[Frack Equipment Suppliers = 1, Frack Service Providers = 7]

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?
Stay the same: 8

2. Would you characterize the supply of pressure pumping equipment in your area as excessive, sufficient or insufficient to meet 2015 demand?
Sufficient: 8

3. How would you estimate total HHP capacity for the region?
Avg. total HHP among respondents ~600,000-700,000 HHP*
*This number is a rough estimate as changes and departing fleets have been hard to quantify per respondents.

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?

5a. What is the average cost per stage in your area now?
Average of plug and perf stages: $20,000

5b. Do you expect fracking service prices to increase, remain the same, or decrease over the next three months?
Remain the same 8

6a. What strategies are companies putting into place to cope with a low price environment?
Operators asking and getting price concessions: 5
Buying chemical and sand direct: 3

6b. What are you seeing in terms of the number of wells drilled, but NOT completed in your area?
Operators have been delaying some completions (no specific number): 7

End Statistical Survey