Fracking Prices Level Out In Dry Gas Basins

Synopsis

Pricing appears to have bottomed for well stimulation services in the traditional dry gas shales, including the Barnett, Haynesville and dry Woodford. Two of the Big Three well stimulation firms have shut down regional yards and are supplying equipment as needed from either the Permian Basin or the Eagle Ford Shale. Another service provider has closed shop in the region. Service providers cite a per stage pricing range of $50,000 in the slickwater dominant Barnett and Woodford, up to $78,000 in the deeper and higher pressured Haynesville. Those prices are down nearly 30% sequentially versus last quarter. Well stimulation service providers believe that activity will pick up by year end, which matches public pronouncements from operators and service companies about incremental activity gains in the Haynesville as operators deploy enhanced completion techniques, longer laterals and examine the opportunity for re-fracks.

Part I. – Survey Findings

Among Survey Participants:

• Demand Stabilizing Following Drastic Drop
  [See Question 1a and 1b on Statistical Review]
  ​All respondents reported demand for pressure pumping services is expected to stabilize at current low levels QTQ. Respondents stated that drilling has slowed considerably and many companies have delayed completions. Adjustments have been made to fleets and crews to accommodate lower demand during the next quarter. One respondent expects demand for his company’s fleets to increase slightly now that others have pulled fleets out of East Texas and Louisiana.
  • Mid-Tier Service Provider: “We believe demand for the region has hit bottom and leveled out. Several companies have moved their fleets out of Shreveport/Bossier City, and out of North Texas, so local demand for our remaining three fleets may actually increase.”

• Oversupply of Pressure Pumping HHP
  [See Question 2 on Statistical Review]
  ​Five of eight respondents reported the supply of pressure pumping fleets in the area is greater than demand currently. However, three respondents think demand and supply have rebalanced after fleets have shut down or moved out of the area.
  • Mid-Tier Service Provider: “We have seen two of the Big Three pull out of their area yards and handle work here only by traveling from Permian or the Eagle Ford, and one company has closed down.”

• Total HHP Capacity in Dry Gas Basin Estimated at 500,000 HHP
  [See Question 3a on Statistical Review]
  ​No respondents made a HHP estimate, but at least one company closed down and others have moved fleets, leaving 500,000 HHP or less in the combined Dry Gas region.
  • Mid-Tier Oil Producer: “Many former Haynesville fleets went elsewhere in Texas, but those providers will supplement this area as needed with fleets from the Eagle Ford or Permian.”

• Supply Stabilizing in Area: One Provider Closed Down Completely
  [See Question 3b and 3c on Statistical Review]
  All respondents agreed no new providers have entered the area. Five providers believe the area is still oversupplied, but three respondents reported one company closed completely and several others have moved fleets.

• Well Frack Metrics Vary Across the Region
  [See Question 4 on Statistical Review]
  Well metrics vary greatly across this region. See Table I below for metrics on various plays in the region.

Table I – Well Metrics for Fracking in Dry Gas Region

• Cost per Stage Averages
  [See Question 5a and 5b on Statistical Review]
  Respondents working in the various plays reported average cost per stage figures as such:
  Haynesville Shale: $78k per stage
  Woodford/Barnett Shales: $50k per stage
  ​All respondents expect prices to remain flat QTQ, having hit “bottom” earlier. Respondents expect prices to slowly increase by year end.
  • Mid-Tier Operator: “Pricing has hit bottom. We have been working with very little margin and sand and water prices have now come down to where we think we are at rock bottom prices.”

• Service Providers Offer Price Concessions
  [See Question 6a and 6b on Statistical Review]
  Service providers have made sacrifices to keep working. All reported giving aggressive pricing concessions of 25% to 35% for pressure pumping work. Sand and water suppliers have also begun reducing the price of their commodities to help lower the overall cost of completions. In spite of the lower pricing, many fleets have been parked and crews reduced across the region because drilling has slowed by almost 50%. Furthermore, many drilled wells are delayed for completion until oil and gas prices recover.

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 Dry Gas region, including the Barnett and Haynesville shale areas. In addition, some participants work in the Traditional Woodford Shale in Oklahoma. Participants include six managers or sales professionals with well stimulation companies and two completions engineers with service providers in the region. Interviews were conducted during mid-April 2015.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Dry Gas Basin]

Total Respondents = 8
[Pressure Pumping Service Providers = 8]

1a. Do you expect demand for pressure pumping equipment to grow, remain the same or shrink in 2Q15 compared to 1Q15?
Remain the same: 8

1b. Why?
Demand has stabilized at bottom: 8

2. Would you characterize the supply of pressure pumping equipment in your area as excessive, sufficient or insufficient to meet 2015 demand?
Sufficient: 3
Excessive: 5

3a. In your estimation, what is the total HHP in your area?
All respondents declined to estimate horsepower due to uncertainty and movement of fleets at present.
Previous Average less departing fleets ~500,000 HHP

3b. Have any new providers entered the play in the last 90 days?
None reported 8

3c. Have any new providers exited the play in the last 90 days?
2 Top Tier companies moved fleets 4
One company closed down 4

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

5a. What is the average cost per stage in your area? (Some respondents gave more than one answer)
# of Respondents
Haynesville $78k per stage 4
Woodford & Barnett $50k per stage 6

5b. Do you expect fracking prices to increase, decrease, or remain the same over the next three months?
Remain the same (0%): 8

End Statistical Review