Synopsis

Tough times mean slower payment for oil services in dry gas basins.

Operators are slow-walking payment for service providers in the Barnett, Haynesville and Fayetteville shales, adding to the general angst among contractors. Service providers are responding by sitting down with operators before a job commences to verify the customer has the means and the will to pay for services, according to Hart Energy’s Heard In The Field survey.

Average price per stage for well stimulation work has fallen to $32,500 regionally in the traditional dry gas basins and East Texas. Haynesville well stimulation is averaging $50,000 per stage, down from $61,000 in September 2015.

Haynesville completions are more expensive because operators make greater use of gels and ceramic proppants to offset the physical challenges of the deep high temperature high pressure natural gas environment.

In general, the traditional dry gas basin market has flattened for a majority of contractors although a few oil service firms are reporting decreased work volume, which is in line with declining drilling in the Haynesville Shale.

Activity clusters include the Cotton Valley and Eaglebine plays in East Texas and Northern Louisiana, though at reduced levels. Service providers tell Hart Energy the region requires $3.25 gas and $55 oil to stimulate oilfield service demand.

Service providers report regional hydraulic horsepower (hhp) at 346,000 hhp, down from 500,000 hhp six months ago.

Well stimulation providers have consolidated equipment yards in Texas and work multiple markets out of a single yard, moving crews about as needed. Service providers estimate there are 10 to 12 crews active in the traditional dry gas basins, though drilling has shut down in the Fayetteville and is occurring at very low levels in the Barnett.

Watch for the next Heard In The Field report on the dry gas basin well stimulation/pressure pumping market in September 2016.

Part I. – Survey Findings

Among Survey Participants:

  • Demand Flat to Slightly Down Quarter-To-Quarter
    [See Question 1 Statistical Review]
    ​Six of eight respondents reported that demand in first-quarter 2016 has remained the same as the fourth quarter of 2015, but two said it had shrunk because of more rigs being released. Two respondents mentioned that work taking place in Eaglebine and Cotton Valley plays offer some stability for local service providers.
    • Mid-Tier Service Provider: “We have seen very little activity in the Barnett or Haynesville, but Cotton Valley and Eaglebine activity offers some hope.”
  • Higher Oil, Gas Prices Needed
    [See Question 2 on Statistical Review]
    ​Among respondents, an average oil price of $55 and an average natural gas price of $3.25 would help bolster demand for completions.
    • Mid-Tier Service Provider: “These East Texas and Louisiana wells won’t get exciting again until oil is above $50 and gas is above $3. Until then, we hope to survive.”
  • HHP Capacity Estimates Continue to Drop
    [See Question 3 on Statistical Review]
    Estimated regional hydraulic horsepower (hhp) now averages 346,000 hhp, down from the 500,000 hhp reported in September 2015.
  • Several Companies Share Fleets Across Multiple Plays
    [See Question 4 on Statistical Review]
    ​Among respondents, the average total crew count in the area was estimated at 12 with service providers estimated that between 10 to 20 fleets remain in the area. Several companies have roving fleets and will travel anywhere in Texas, Oklahoma or Louisiana as needed.
    • Mid-Tier Service Provider: “Most service providers are like us, moving fleets across several plays to try and keep remaining crews busy.”
  • Dry Gas Basin Metrics: Vertical Depth Ranges from 6,000- To 12,000 Feet
    [See Question 5 on Statistical Review]
    ​Average vertical depth reported is 8,500 feet in the Barnett, 9,500 feet in the Cotton Valley and 12,000 feet in the Haynesville. Average lateral length is 6,250 feet. The stage count average is reported at 25. Injection rates average 73 barrels per minute with about six stages completed daily on a 24-hour schedule.
    • Mid-Tier Operator: “Our jobs are averaging 20 to 25 stage slick water fracks on plug and perf. However, we are often rolling across the region to other locations with a lot of variation.”
  • Average Cost Per Stage Across Region: ~$32,500, Except For Haynesville
    [See Question 6 and 7 on the Statistical Review]
    ​Service providers report that the average per stage price is $32,500. Haynesville wells average $50,000 per stage. This compares to an average $61,000 per stage across the traditional dry gas basins in the September report. Two service providers mentioned that Haynesville wells are hotter and deeper with higher pressures. Six respondents expect prices to remain unchanged over the next three months, while two expect further decreases as clients seek ways to reduce costs.
    • Mid-Tier Service Provider: “Virtually everyone left is trying to break even and hold on at these prices. It should remain flat until price recovery.”
  • Most Respondents Say Slower Pay Is Growing Concern
    [See Question 8 on the Statistical Review]
    Six of eight respondents reported operators are paying slower now, resulting in careful discussions and careful negotiations before each job starts to avoid losses.

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 traditional dry gas plays, including the Barnett, Fayetteville and Haynesville shales. Interviews also addressed the East Texas market. Participants included eight managers or sales personnel with well service companies. Interviews were conducted during late March 2016.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Dry Gas Basins]

Total Respondents = 8

[Fracking service providers = 8]

1. Do you expect demand for pressure pumping equipment to grow, remain the same or shrink first-quarter 2016 compared to the fourth quarter of 2015?

Remain the same:

6

Shrink:

2


2. What oil price (per barrel) and what natural gas price (per thousand cubic foot) is needed for demand for fracking services to improve?

Oil
Price

# Of
Responses

Gas
Price

# Of
Responses

$55-$60

3

$3.01-$3.50

5

$50-$54

5

$3

3

Average $55

Average $3.25


3. In your estimation, what is the total hydraulic horsepower (hhp) in your area?

251,000-500,000 hhp:

6

250,000 hhp:

2

Average among all respondents:

~346,000 hhp


4. How many total crews (spreads) do you estimate are active in the area?

10-12:

5

13-20:

3

Average estimated:

12 crews


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

Average vertical depth:

Barnett:

8,500 feet

Cotton Valley:

9,500 feet

Haynesville:

12,000 feet

Average horizontal lateral length:

6,250 feet

Average number of frack stages:

25

Injection rates (barrels per minute):

73

Average number of frack stages per day:

6

12-hour or 24-hour:

24-hour


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

$25,000-$40,000:

6

$41,000-$50,000:

2*

Average cost per stage:

$32,500 per stage

*Two respondents said Haynesville wells cost $50,000 or more (not used in averages).


7. Do you expect fracking prices to increase, remain the same, or decrease over the next three months?

Remain the same:

6

Decrease further:

2


8. Are operators delaying paying their invoices? Are service providers taking any special steps when it comes to collecting receivables?

Yes:

6*

No:

2

*Four respondents said discussions about pay schedules were emphasized during negotiations.


End Statistical Survey

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