Synopsis

Pricing for well stimulation services has dropped 32% to $69,000 per stage in the last 90 days, though may be close to bottoming. Operators are still negotiating to reduce costs further on the materials side. The drive to cost reduction has also encouraged growing use of massive slickwater treatments versus linear gel. Contractor have idled a large amount of equipment, though it is difficult to identify the volume definitively. However contractors reported that demand was tight in late 2014 with 2.8 million hydraulic horsepower (hhp) in the region. Currently the number of active capacity is estimated at about 1.5 million hhp. Look for the next Eagle Ford well stimulation report in June 2015.

Part I. – Survey Findings

Among Survey Participants:

  • Pressure Pumping Demand Down 1Q15 QTQ, Expected to Stabilize at Bottom through 2Q
    [See Question 1a and 1b on Statistical Review]
    ​Six of eight respondents reported that demand for pressure pumping services has been stable late in the first quarter after falling earlier after the oil price demise. Looking forward to 2Q15, demand is expected to continue to be stable, but “at the bottom” for several respondents.
    • Mid-Tier Service Provider: “Operators moved quickly to make cuts and slow down drilling and cut frack fleets. It is actually stabilizing now.”

​

  • HHP Supply Sufficient for the Region; Several Fleets Idle
    [See Question 2 and Question 3 on Statistical Review]
    ​Service providers reported the hydraulic horsepower (hhp) pressure pumping equipment in the region is sufficient to meet current demand and is estimated to be ~1.5 million hhp. There has been as much as 30% to 40% of fleets idled and crews laid off, but idled equipment remains in the area. One respondent thinks the area is still oversupplied with active fleets.
    • Mid-Tier Service Provider: “We had seven fleets working flat-out in the play in 4Q2014 and we are already down to four fleets and they have openings for spot work on the schedule.”
    • Mid-Tier Service Provider: “With so many fleets idled and crews cut, there is a balancing of demand occurring, but there is also a major backlog of fracks beginning to build for the future.”
  • Eagle Ford Well Metrics: Vertical Depth ~9,156-ft, Horizontal Laterals ~6,719-ft.
    [See Question 4 on Statistical Review]
    ​Average vertical depth reported among respondents was 9,156-ft.; average horizontal lateral length was 6,719-ft. Average number of stages is 25 with 200-ft. to 250-ft. spacing on stages. Injection rates average 78 bpm with about six stages completed daily on a 24-hour schedule. Huge sand volumes continue to be used in completions but less linear gel is reported in use.
    • Completions Consultant: “We still see large sand volumes, but more operators are using less linear gel and going with straight slick water.”
  • Average Cost Per Stage Down to ~$69,000
    [See Question 5a on the Statistical Review]
    ​The average per stage price is $69,000 and is expected to level off over the next quarter after dropping 30% to 35% since 4Q14. The amount of proppant used will likely remain the same, but operators continue renegotiating prices for all materials and services involved in frack.
    • Consulting Engineer: “With most clients there is a realization that price is nearing bottom. Frack providers have little margin left to cut. Only materials are inching down now.”
  • Flat Prices Expected QTQ
    [See Question 5b on the Statistical Review]
    ​Seven of eight respondents expect prices to remain flat during the next three months. One respondent believes water, acid and sand may still decline in price.
    • Mid-Tier Service Provider: "Discounting has taken prices to about bottom. We now 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]
    While some operators are using more slick water and less linear gel as a cost saving measure, most price concessions have come by renegotiating prices of services and materials. Operators are slowing down completions and allowing a backlog of drilled but unfracked wells to grow. No exact numbers of backlogged wells was estimated by respondents but all acknowledged there is a growing backlog, which will bode well for future frack 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 two oil and gas consultants and six managers or sales personnel with well service companies. Interviews were conducted during early March 2015.


Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Eagle Ford Shale]
Total Respondents = 8
[Consultants = 2, Frack Service Providers = 6]

1. Do you expect demand for pressure pumping equipment to grow, remain the same or shrink in 2Q15 compared to 1Q15?
Expect to remain the same: 7
Shrink: 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: 7
Excessive: 1

3. How would you estimate total hhp capacity for the region?
Avg. total HHP among respondents 1,500,000* HHP
*Most respondents acknowledged that the horsepower likely is still in the play, but 30-40% 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 9,156-ft.
Average Horizontal Lateral Length 6,719-ft.
Average No. of Frack Stages 25
Injection rates (barrels/min) 78
Average No. of Frack Stages/Day 6
12-hr or 24-hr 24-hr

5a. What is the average cost per stage in your area now?
$60,000-70,000 6
$71,000-80,000 2
Average cost per stage: $69,000 per stage*
*Cost per stage is 30% to 35% lower according to most respondents, representing lower costs for materials and services prices.

5b. Do you expect fracking prices to increase, remain the same, or decrease over the next 3 months?
Remain the same (0%): 7*
Decrease: 1
*Most respondents expect that prices have bottomed and leveled off, but one believes prices for water, sand and acid may still decline further.

6a. What strategies are companies putting into place to cope with a low price environment?
Less gel, more slick water only: 3
Renegotiating everything: 2
Delaying fracks: 3

6b. What are you seeing in terms of the number of wells drilled, but not completed in your area?
All respondents acknowledged that companies are drilling more wells than they are fracking and backlogs are growing, though none estimated the number of unfracked wells.