• Sand use per well drops in the Bakken
  • Zipper fracks fall below 45% as backlog of drilled but uncompleted wells tops 1,000
  • Drilling activity down 71% from peak

As winter blows in, operators in the Bakken Shale are reducing drilling levels, cutting back on well completions and seeking cost reductions in downhole stimulation by cutting proppant loading.

Indeed, the frost is on the pumpkin in North Dakota. Horizontal rig count was down to 62 units in November 2015, a 71% drop from the May 2012 peak. There were more than 190 units drilling horizontally one year ago. When compared to all other U.S. unconventional markets, the Bakken has witnessed the greatest percentage decline in activity. Numerically, only the Permian Basin has seen a greater drop in active horizontal rigs in the last year, with 174 units laying down vs. 135 in the Bakken.

Drilling contractors told Hart Energy that regional fleet utilization is down to 40% compared to 66% during summer 2015. Contractors are coming to terms with the severity of the downturn, and a majority don’t expect demand for drilling services to improve until 2017.

Day rates continue to erode and were averaging $18,000 in November 2015 for a 1,500-hp AC-VFD drilling unit. Long-term contracts support some remaining drilling activity. However, rig rates quickly drop to spot market when contracts expire or rigs stack out.

“Our 1,500s are going in the $18,000 range, but recently we offered a rig at $15,000 and it didn’t get picked up,” a mid-tier contractor told Hart Energy surveyors. “It doesn’t matter what the rate is; it only matters if there is demand.”

Outside the core Bakken Shale, operators do not appear to be interested in a rig at any price since that section of the play is not economic in the current commodity price environment.

After a brief gain in reducing the inventory of wells drilled but uncompleted in summer 2015, operators once again slowed completion rates, and the “fracklog” backlog has now climbed above 1,000 wells.

Meanwhile, the percentage of zipper fracks, which serves as an analog for batch completions, dropped to 43% in mid-November 2015 from more than 60% in August, according to service providers participating in Hart Energy’s market intelligence surveys. In other words, more than half of completions are for single wells only despite the fact several laterals are drilled from the same pad.

Regional well stimulation effective capacity has fallen below 500,000 in hydraulic horsepower, or about half what it was at the beginning of 2015. Service providers indicate only 12 to 15 fleets are active in the play. Several well stimulation firms have left the region, and the sector is characterized by a large number of idled and underutilized units.

Otherwise, little has changed in the completions market. The focus remains slickwater fracks and plug and perf with high proppant loading and 30 to 40 stages per 3,048-m (10,000-ft) lateral. Proppant use fell from 6 million pounds per lateral in August 2015 to 5 million pounds in November as operators seek further cost reductions. The average price per stage fell to $30,300 vs. $37,000 in August 2015.

There is little holiday cheer for the workover market, where demand continues to erode. Contractors are scrambling for market share by cutting hourly rates as a price war unfolds between the smaller mom and pops and the larger regional or national service providers. Contractors in all categories are slashing employee pay and bundling more services into the hourly rate. Routine maintenance accounted for 89% of Bakken workover job mix in mid-November 2015 as operators do only what is necessary to keep production flowing in a low commodity price environment.

Few service providers see a pickup in regional activity among any service line until sustained pricing for oil climbs back to $60.

Contact the author, Richard Mason, at rmason@hartenergy.com.

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