Synopsis

No rest for weary well stimulation service providers who are hoping for improved market conditions.

The outlook is dim in the current Permian Basin well stimulation survey. Half of the survey respondents expect no increase in demand in the next 90 days while the other half expects demand for services to fall further.

The pre-Christmas holiday drop in oil prices unnerved several well stimulation providers, some of whom fear it will lead to issues of survival if sustained and demand for well stimulation services goes lower.

Survey respondents reported a further decline in regional pressure pumping capacity to 1.14 million in hydraulic horsepower (HHP), down from 1.18 million HHP just 90 days ago.

In general, survey participants estimate there are 40 to 50 crews scattered across the Permian though most are significantly underworked.

As noted in the Permian downhole completions report, some operators are shifting back to vertical wells in order to keep costs down. The average price per stage has fallen to $34,000, or about the average reported in several unconventional markets nationwide, though the Permian figure includes lower-priced work for vertical wells.

A majority of respondents said contractors were working at operating cost levels and did not anticipate any further decline in pricing.

Work volume remains sluggish. Operators are drilling fewer wells and completing those one well at a time while pressuring service providers for additional cost cuts.

Watch for the next Permian well stimulation report in March 2016.

Part I. – Survey Findings

Among Survey Participants:

  • Demand Expected To Remain Steady Or Slip Quarter-To-Quarter
    [See Question 1 on Statistical Review]
    ​Four respondents expect demand to remain the same first-quarter 2015 quarter-to-quarter. However, the other four expect demand to shrink even further.
    • Mid-Tier Service Provider: “We see continued shrinkage into 2016.”
  • HHP Capacity Still Oversupplied
    [See Question 2 on Statistical Review]
    ​Seven of eight respondents reported an oversupply of HHP capacity in the area, but one reported a sufficient supply, though many fleets are not utilized fully.
    • Mid-Tier Service Provider: “This last [oil] price hit has everyone worried. Virtually all providers are concerned about survival as demand shrinks further.”
  • Fracking Capacity Reported Averages 1.1 Million HHP
    [See Question 3a, 3b, and 3c on Statistical Review]
    ​Among respondents, HHP capacity in the region is estimated to be about 1.14 million HHP in the play, down slightly from 1.18 million HHP estimated in September. Most respondents estimated that 40 to 50 fleets continue to service the area, but many are underutilized.
    • Mid-Tier Service Provider: “We have stayed busy with our remaining fleets until now, but no one is sure what 2016 brings.”
  • Permian Well Metrics: Vertical Depth Ranges 4,000- to 10,000 Feet Depending on Area
    [See Question 4 on Statistical Review]
    ​Average vertical depth reported is about 6,929 feet across the play. Two providers mentioned their current work is almost exclusively vertical wells now, especially shallower San Andres wells. Average lateral length is 6,714 feet. Average number of stages is 30. Injection rates average 68 barrels per minute with about six stages completed daily on a 24-hour schedule.
    • Mid-Tier Operator: “We normally do 20 to 30 stage fracks in the Permian on 7,000-foot or longer laterals, but we may see more go back to vertical wells to keep overall costs down.”
  • Average Cost Per Stage in Region: ~$34,000
    [See Question 5a and 5b on the Statistical Review]
    ​The average per stage price is reported at $34,000, down from September findings. This average includes some vertical frack prices, which lowers the average. One operator reported the continued use of ceramics with those fracks costing in the $60,000 range per stage. All respondents expect prices to remain the same over the next three months.
    • Completions Consultant: “We have seen prices stabilize here at break-even pricing.”
  • Pricing Negotiations, Delayed Drilling/Completions Continue
    [See Question 6a and 6b on the Statistical Review]
    Six respondents mentioned that pricing continues to be negotiated downward as operators seek to survive in the low oil price environment. Furthermore, backlogs of unfracked wells are building as many operators are delaying completing wells until the oil price recovers. In addition, fracking work has slowed because drilling has slowed.

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 Permian Basin. Participants included seven managers or sales personnel with well service companies and one completions manager working for an E&P company. Interviews were conducted during the third week of December 2015.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Permian Basin]

Total Respondents = 8

[Service providers = 7, Operators = 1]

1. Do you expect demand for pressure pumping equipment to grow, remain the same or shrink in first-quarter 2016 compared to the fourth quarter of 2015?

Remain the same:

4

Shrink more:

4


2. Would you characterize the supply of pressure pumping equipment in your area as excessive, sufficient or insufficient to meet early 2016 demand?

Sufficient:

1

Excessive:

7


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

Average total HHP:

~1.14 million HHP active


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

40-50:

8


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

No specific reports of total pull out:

8*

*Several reports of reduced fleets etc.


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?

Average vertical depth:

6,929 feet

Average horizontal lateral length:

6,714 feet

Average number of frack stages:

30

Injection rates (barrels per minute):

68

Average number of frack stages/day:

6

12-hour or 24-hour:

24-hour*

*12-hour scheduling reported for vertical well projects


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

$18,000-30,000:

5

$32,000-60,000:

3

Average cost per stage:

~$34,000 per stage


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:

6*

Delaying drilling and frack jobs:

6*

Moved to vertical wells only:

2

(Some respondents gave more than one answer.)


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

All reported many delayed fracks with a large backlog building.


End Statistical Survey