A late freeze in the form of July’s 25% drop in WTI crude oil prices nipped in the bud the first green shoots of new demand for oilfield services. Domestic markets had stabilized across service lines in terms of pricing and activity after a brutal first-half 2015, and bid inquiries were trending up, albeit at modest levels, when global oil markets hit another round of turbulence.

The unexpected market event was reflected in a rapid deterioration in sentiment for oil service providers. Though rig count improved incrementally in the Permian Basin, it experienced a new round of declines in the Eagle Ford, Marcellus and Bakken shales. Well stimulation firms had been working through a backlog of drilled but uncompleted wells until the effort slowed in late July.

Surveys of Appalachian oil service providers captured the sentiment change.

“The market is back down again,” one mid-tier Marcellus driller told Hart Energy telephone surveyors. “It had begun to inch up a little, but now it is down with all the uncertainty in the Middle East. We are about to lay down another rig.”

A manager for a mid-tier workover firm echoed the sentiment.

“I’ll say the pain up here for certain operators is just starting, and we don’t see a recovery in Appalachian rig counts until mid-2016.”

A mid-cap operator provided perspective from the E&P side. “We still plan to have a number of wells on our pads eventually but have slowed both our drilling and rate of completions.”

Two large multinationals significantly reduced natural gas drilling and completions in Appalachia, according to survey respondents, while independent oil and gas operators began taking a wait-and-see approach or started reallocating capital out of the region to core holdings elsewhere in the U.S. Improvements in completion effectiveness have kept regional natural gas production rising even at lower rig counts.

The percentage of Appalachian wells reported as zipper fracked dropped from more than 70% in second-quarter 2015 to about 50% in early August, reflecting a renewal in delays between drilling wells and completing them in an oversupplied market buffeted with a lack of midstream takeaway capacity.

The downturn in sentiment was reflected in a tendency among oil and gas operators to stick with the tried-and-true. For Appalachian completions, that means reliance on slickwater fracture stimulation with large volumes of bulk commodity sand (usually 7 million lb or more per lateral) in plug-and-perf completions. Reductions in stage spacing have stabilized at around 61 m (200 ft). Stage count among surveyed service providers was in the high 30s on wells that averaged 2,073 m (6,800 ft) vertically and 1,951 m (6,400 ft) horizontally. However, price per stage dropped to just under $40,000, down from $68,000 early in second-quarter 2015 and $91,000 during fourth-quarter 2014.

“Prices are too low right now, and everyone is hurting,” a mid-tier regional pressure pumper told Hart Energy. “Sand, chemical companies and everyone have shared the sacrifice to get costs down and keep working.”

Regional pressure pumping capacity in Appalachia, as measured in hydraulic horsepower (hhp), has settled between 750,000 hhp and 1 million hhp, down 600,000 hhp since the first of the year. Survey respondents said market turmoil made it difficult to produce definitive regional capacity.

Rig rates for the benchmark 1,500-hp Tier I AC-powered land rig averaged $20,000/d in August, though demand remains muted. Survey respondents pegged Appalachian drilling rig utilization at 50%.

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