Synopsis

The continuing cuts to commodity price have increased uncertainty in the Midcontinent well stimulation market.

Demand for Midcontinent well stimulation services declined over the last 90 days, and are expected to decline further in 2016.

Regional pressure pumping capacity is oversupplied and underutilized even as well stimulation firms have moved equipment out of the region, or shut down fleets.

Survey participants estimate regional capacity at 563,000 in hydraulic horsepower (HHP), up incrementally from the 530,000 HHP reported in October.

However, survey respondents emphasize volatile market conditions make it difficult to come up with a definitive number. This particular survey focused more on the Stack Play since it is the most active area in the Midcontinent.

Respondents note the average price per stage is $33,000, up from $31,000 reported in October, but incorporating longer laterals associated with the Stack.

Service providers say the only way to lower prices further involves using less sand and chemicals.

Pricing has fallen so low that well stimulation service providers are shutting down fleets or moving equipment elsewhere as operators slow the pace of drilling and completions. Consequently, the backlog of drilled but uncompleted wells (DUCs) is rising.

Most smaller independents are no longer drilling horizontally because of the large capex and focusing solely on vertical wells when they are active.

Watch for the next Midcontinent pressure pumping report in April 2016.

Part I. – Survey Findings

Among Survey Participants:

  • Demand Shrinking Quarter-To-Quarter In The Region
    [See Question 1a and 1b on Statistical Review]
    ​Five of eight respondents reported that demand in the first quarter of 2016 is shrinking compared with fourth-quarter 2015 because of the low oil price. Most respondents expect demand to shrink again due to the oil price dropping below $30 recently.
    • Mid-Tier Service Provider: “Most clients were trying to hang on and keep working until a recovery, but we are not sure now with oil prices below $30.”
  • HHP Supply Excessive
    [See Question 2 on Statistical Review]
    ​Six respondents reported an excessive supply of HHP capacity remains in the area, even after several fracking service providers moved fleets out of the region or shut down fleets entirely.
    • Mid-Tier Service Provider: “There are too many underutilized fleets still hanging on, causing an oversupply.”
  • Fracking Capacity Reported Averages ~560,000 HHP
    [See Question 3a, 3b, and 3c on Statistical Review]
    ​Among respondents, HHP capacity in the region is estimated to be approximately 563,000 HHP in the play, slightly more than the 533,000 HHP estimated in the October report. Most respondents acknowledge it is hard to pinpoint exact HHP figures as fleets are constantly relocating or shutting down entirely.
    • Mid-Tier Service Provider: “We are down from four fleets to two and one smaller fleet doing verticals.”
  • Midcontinent Well Metrics: Vertical Depth Ranges ~8,500 Feet
    [See Question 4 on Statistical Review]
    ​Average vertical depth reported is 8,500 feet across the region. While most respondents reported on the Stack Play in Oklahoma, some were reporting other areas, including one working on vertical wells only. The average lateral length reported is 6,786 feet and the average number of stages is 33. Injection rates average 66 barrels per minute with about six stages completed daily on a 24-hour schedule.
    • Mid-Tier Service Provider: “We are usually doing 40 to 50 stage fracks in the Stack [Play] on 10,000-foot laterals, but we have some clients doing lower cost slickwaters on 5,000-foot laterals too.”
  • Average Cost Per Stage in Region: ~$33,000
    [See Question 5a and 5b on the Statistical Review]
    ​The average per stage price is reported at $33,000, which is slightly higher than the $31,000 reported in October because of current respondents’ focus on the Stack Play. All respondents expect prices to remain the same over the next three months.
    • Mid-Tier Service Provider: “Prices are at as low as possible. The only way to go cheaper is to use less sand or chemicals, etc.”
  • Backlog Of Fracks Building, But Pace Of Drilling And Completing Wells Very Slow
    [See Question 6a and 6b on the Statistical Review]
    ​Most operators have slowed both drilling and completions, according to respondents. A backlog of uncompleted wells continues to build, but at a slower pace than earlier because of the slowdown in drilling. In addition, there is no momentum for higher prices in today’s dismal market. Only one respondent said production has been enhanced by using surfactants.
    • Mid-Tier Operator: “We see no reason to spend big money on horizontals now. XTO and Chesapeake-type companies with deeper pockets are still active in the Stack, but we go only after low cost vertical wells now.”

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 Midcontinent region. Participants included six managers or sales personnel with fracking service providers, one completion tool supplier, and one chief executive officer for an E&P company. Interviews were conducted during the second week of January 2016.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Midcontinent]

Total Respondents = 8

[Fracking service providers = 6, Completion tool supplier = 1
Operators = 1]

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

Remain the same:

3

Shrink:

5


2. Would you characterize the supply of pressure pumping equipment in your area as excessive, sufficient or insufficient to meet early 2016 demand?

Excessive:

8


3a. How would you estimate total HHP capacity for the region?

Average total HHP:

~563,000 HHP active


3b. How many total crews (spreads) do you think are active in the area?

20-25:

4

20-30:

2

No response:

2


3c. Have any service providers left the play in the last 90 days?

Several service providers have moved fleets out of the area:

6

Some smaller service providers shutdown:

1

Not sure:

1


4. 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:

8,500 feet

Average horizontal lateral length:

6,786 feet

Average number of frack stages:

26

Injection rates (barrels per minute):

66

Average number of frack stages per day:

6

12-hour or 24-hour:

24-hour


5a. What is the average cost per stage in your area now?

$15,000-30,000:

3

$30,000-40,000:

5

Average cost per stage:

~$33,000 per stage


5b. Do you expect fracking prices to increase, remain the same, or decrease over the next three months?

Remain the same (0%):

8


6a. What strategies are companies putting into place to cope with a low oil price environment? (Some respondents gave more than one answer.)

Still negotiating pricing:

4*

Slowed pace of drilling and frack jobs:

7

Improving efficiency by using surfactants:

1


6b. What are you seeing in terms of the number of wells drilled but not completed in your area?

All respondents reported a general slowdown in drilling and completing wells, with frack backlog continuing to build.


End Statistical Survey

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