Synopsis

Well stimulation service providers are hoping additional pipeline capacity in the Appalachian Basin will lead to additional work. Otherwise service providers are characterizing the market as stable, but at a very low level of activity. The toll of drilled but uncompleted wells continues as operators slow walk the drilling and completion process in the wake of an oversupply of commodities and low commodity prices. An estimated 50% of drilled wells are not being completed or experiencing delayed completions. Service providers estimate regional effective well stimulation capacity, as expressed in hydraulic horsepower (HHP), as between 750,000 HHP and 1 million HHP. The large number of idled fleets render capacity estimates as “best guess” estimates. Generally, well stimulation capacity is down another 300,000 HHP per day versus the fleet in May, and 600,000 HHP vs. February. Pricing is listed as stable but, at $38,000 per stage, is down significantly from the $68,000 per stage reported in first-quarter 2015. The majority of service providers believe pricing has bottomed though a minority expect pricing to erode further. Significant reductions in service pricing coupled with productivity gains in completion effectiveness are sustaining production, which allows oil and gas operators to continue field work in a low price environment, though on a reduced level. Watch for the next Marcellus well stimulation report in November 2015.

Part I. – Survey Findings

Among Survey Participants:

  • Demand Remains Flat Quarter-To-Quarter
    [See Question 1 on Statistical Review]
    ​The majority of respondents reported that demand has remained flat quarter-to-quarter in the region. Demand remains stable, but low due to weak commodity pricing. However, a few respondents expressed some optimism about demand increasing as new pipeline projects in the Northeast come online at year’s end.
    • Mid-Tier Service Provider: “Demand remains fairly consistent, but flat since we continue to see prices resist recovery. Some expect better demand once the pipelines to the Northeast come online later this year.”
  • HHP Supply Sufficient For The Region
    [See Question 2 on Statistical Review]
    All respondents agreed there is sufficient supply even though many fleets have been idled. No providers have pulled out of the region recently.
    • Mid-Tier Service Provider: “Our main customers remain in a slowdown with many wells drilled but fracks delayed until recovery.”
  • 750,000 HHP To 1 Million HHP Capacity Estimated In The Region
    [See Question 3 on Statistical Review]
    Respondents estimated total HHP within the range of 750,000 HHP to 1 million HHP in the play. However, most respondents reported a high number of idled fleets.
  • Marcellus Wells: Vertical Depth About 6,819 Feet, Horizontal Laterals About 6,444 Feet
    [See Question 4 on Statistical Review]
    ​Average vertical depth reported is about 6819 feet in the Marcellus with an average 6,444 feet of horizontal lateral. Average number of stages is 39. Injection rates average 77 barrels per minute with about six stages completed daily on a 24-hour schedule.
    • Small Tier Service Provider: “We just get a sense that every operator is being ultra conservative on spending.”
  • Average Cost Per Stage In Marcellus About $38,000
    [See Question 5a on the Statistical Review]
    ​The average per stage price is reported at $38,000 and is expected to remain the same over the next three months. Seven of eight respondents expect prices to remain flat in the next quarter and one provider expects that prices will continue to decline. The current cost per stage has declined significantly from the $68,000 per stage cost reported in May.
    • Mid-Tier Service Provider: “Prices are too low right now and everyone is hurting. Sand, chemical companies and everyone have shared the sacrifice to get costs down and keep working.”
  • Flat Prices Expected Quarter-To-Quarter
    [See Question 5b on the Statistical Review]
    Seven of eight respondents expect prices to remain flat during the next three months. One respondent thinks pricing will continue to slip until new pipelines increase demand over the next quarter.
  • Pricing Concessions And Completion Efficiencies Help Operators Keep Producing
    [See Question 6a on the Statistical Review]
    ​Marcellus operators reported production efficiencies are helping the industry survive during the extended pricing slump. While the number of rigs drilling has dropped dramatically, production figures have been maintained due to improved efficiencies.
    • Mid Tier Service Provider: "We have seen prices get really low here to help operators keep working. The backlog of wells delayed for completion will become an issue soon.”
  • Delayed Completions Now Reported In Marcellus
    [See Question 6b on the Statistical Review]
    Many completions are now reported as delayed in the Marcellus. While drilling has slowed, several operators are reported as delaying up to 50% of completions as well.

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 Marcellus/Utica area. Participants included six managers or sales personnel with well service companies and two operators. Interviews were conducted during the last week of July 2015.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Marcellus]

Total Respondents = 8

[Fracking Service Providers = 6, Operators = 2]

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

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

3a. How would you estimate total HHP capacity for the region?
Average: 750,000 to 1 million HHP

3b. Have any new providers entered the play in the last 90 days?
No new providers: 8

3c. Have any service providers left the play in the last 90 days?
No: 8

4. What is the average vertical drilling depth, average horizontal lateral length, number of frack stages and injection rates (barrels per min) in this play? What are the average frack stages per day? Is this a 12-hour or 24-hour shift?

Average vertical depth:

6,819 feet

Average horizontal lateral length:

6,444 feet*

Average number of frack stages:

39*

Injection rates (barrels per minute):

77 bpm

Average number of frack stages per day:

6

12-hour or 24-hour:

24-hour

*These lengths and stages reflect regional differences and not spacing changes.


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

$50,000-$70,000:

1

$30,000-$40,000:

7

Average cost per stage:

~$38,000 per stage


5b. Do you expect fracking prices to increase, remain the same, or decrease over the next three months? By what percent?
Decrease: 1
Remain the same: 7

6a. What strategies are companies putting into place to cope with a low price environment? (Some respondents gave more than one answer)
Slowed drilling and negotiated concessions: 8
Delayed fracks: 5

6b. What are you seeing in terms of the number of wells drilled, but not completed in your area?
Frequently delayed completions: 5
Slowed drilling but completing as drilled: 3

End Statistical Survey