![The U.S. Energy Information Administration estimates oil production will fall by about 6,000 barrels per day in the Eagle Ford, shown above, to 1.38 million barrels per day in September. (Source: Shutterstock.com)](/sites/default/files/styles/hart_news_article_image_640/public/image/2019/09/shale-drilling-rig-texas-eagle-ford-basin-source-shutterstock.jpg?itok=3kP2ukTG)
The U.S. Energy Information Administration estimates oil production will fall by about 6,000 barrels per day in the Eagle Ford, shown above, to 1.38 million barrels per day in September. (Source: Shutterstock.com)
HOUSTON—Having fought back from a downturn while trying to please investors, the U.S. shale industry has continued to grow production with the Permian Basin in the driver’s seat thanks to improved techniques and technology.
But there are still opportunities, according to panelists speaking this week during the Rice Alliance’s Energy and Clean Technology Venture Forum.
“We today are only able to produce around 10%, plus or minus, of the oil and gas that’s there. So, basically 90% is left and that’s a big opportunity,” said Steinar Vaage, senior vice president of operations, wells and projects for ConocoPhillips. “We’re interested in ideas and ways on how we can get more out of the wells, more out of the subsurface, so we can increase our recovery.”
ConocoPhillips grew production from its so-called “Lower 48 Big 3”—Eagle Ford, Bakken and Permian Basin—by 26% year-over-year to 367,000 barrels of oil equivalent per day during second-quarter 2019. The company, which expects to operate 10-11 rigs in the Big 3 this year, is also piloting new completion designs.
Data from the U.S. Energy Information Administration show about 8.68 million barrels of oil per day (MMbbl/d) and 80.87 billion cubic feet of gas per day (Bcf/d) were produced from the country’s top seven most prolific basins. Those numbers are expected to rise to 8.77 MMbbl/d and 81.60 Bcf/d this month.
Still, shale drillers are trying to learn more about the rock, including determining how much of the rock is actually actuated during the hydraulic fracturing process, according to Vaage.
“We have some things we’re doing but we need more in that space,” Vaage said. “We don’t really have good data other than what we see [in] production.”
He added more automation is also being sought to conduct operations safer, faster and better.
Shale players have pumped higher concentrations of proppant and fluid, tinkered with cluster spacing and drilled longer laterals to get more oil from reservoirs while bringing down costs. But challenges remain, belowground and aboveground, as shareholders demand to see returns and others move toward cleaner sources of energy.
“As we talk with public companies and we talk with private companies, I think it is a challenging environment for all of us,” said Basak Kurtoglu, senior vice president of Quantum Energy Partners. “But what we are all relying on is…technology.”
Quantum Energy Partners, a Houston-based provider of private equity capital, is present in nearly all basins in the U.S. and is running 28 rigs in North America and Canada.
“We have seen a lot of application of technology,” she said, noting Quantum has operated in HP/HT environments, mitigated shallow fractured reservoirs and worked to drill longer laterals in different basins across the U.S. Across the basins, “the technology is the same; the way that we apply it is different. What makes it different is the mentality in how we approach it across the management teams. So, we embrace technologies as a company but it doesn't end there; it has to go into our management teams and our portfolio companies.”
Today no one is going to sell their best acreage, and it is difficult to monetize assets in current market conditions, she said.
“Before we would be selling these companies in two to three years’ time frame. Now we are looking at four to seven years,” Kurtoglu said.
She added, “Today’s philosophy is we are here longer. Any technology that can help us to bring the cash flow earlier, that can help us improve efficiency, reduce cost, improve productivity,” would be beneficial.
Quantum has invested in startups, including some that have pitched their products at the Energy and Clean Technology Venture Forum. Among these are Seismos, which offers real-time frac treatment and performance evaluation and RigUp Inc., which connects contractors with jobs offered by service providers and contractors. Both are based in Austin.
Among her advice to startups is to “put yourself on the other side” and tell companies what value will be created to help their bottom line. “It’s not just a cool technology.”
Another private equity shop, Kayne Anderson Capital Advisors, doesn’t back the new technology itself but “we do back entrepreneurs who use the best available technology and we are willing to tweak it make it better,” said Mike Heinz Sr., managing director for Kayne Anderson.
With 30 portfolio teams, Kayne Anderson is present in most of the major resource plays in the U.S., running 15-20 rigs this year.
“First off, capital is precious. Raising money is incredibly difficult. So, we’re really not backing teams today that don’t have assets,” Heinz said, noting it is backing repeat teams that have turned profits.
When pitched with new technology services or products, he wants to know about the economics and what will be done differently to make acreage work. Drilling, he said, is focused on returning to areas where horizontal wells were previously drilled and applying today’s learnings.
Like others in the industry, knowledge learned is being transferred from basin to basin.
“We don’t think we’re one of the last ones to bring in the innovation and so forth,” Heinz said, responding to an attendee. “Oftentimes we’re out there seeing what the majors are doing, and they tend to be quite a ways’ behind. … We think we’re scouring the technology.”
He spoke about how one of Kayne Anderson’s portfolio companies was among the first to change sand mesh size and concentration in the Delaware subbasin based on knowledge gained in the Midland subbasin.
Panelists seemed to agree that the industry does embrace proven technology, though the rate of uptake varies depending on the type of company and its comfort level to certain technologies. Kurtoglu mentioned the acceptance of microseismic and how comfortable companies are with how to use data as examples.
“That’s the challenge we are having when I think about the new companies coming in,” she said.
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