• Take a ticket and wait if you want well stimulation services in Appalachia.
  • Recent large-package property sales will bring more acreage into the development sphere.
  • After a sharp jump in pricing for oil services, the rate of change might slow for further increases in second-half 2017.

An activity increase is at hand for the Appalachian Basin but without the same heat as the six-month run that boosted regional rig count to two-year highs in April.

Activity would have been higher but for the region’s well-known midstream issues. Capacity— whether well stimulation, drilling or midstream—is coming online, but the region still suffers from stranded production. Meanwhile, E&P companies are capturing efficiencies as they boost proppant volume and add stages on increased lateral length.

The Marcellus completion cocktail remains little changed as E&P companies settle into acreage harvest mode. That said, the mix of ingredients in that cocktail continues to evolve. Proppant volumes range from 200,000 lb to 500,000 lb per stage regionally but averaged 400,000 lb in a slickwater delivery of mostly finer grade sand for Marcellus targets. Quarterly crowd-sourced proppant volumes averaged 1,880 lb per lateral foot to begin second-quarter 2017 on slightly closer stage spacing.

In contrast, Utica completion recipes involve greater use of hybrid gels and higher-grade proppant, including ceramics and resin-coated sand, to deal with a hostile below-ground environment.

Demand has tightened for high-specification equipment and larger capacity stimulation spreads. Several contractors said they can upgrade drilling rigs from existing inventory but want financial backing from customers before doing so. More customers are doing so, but delivery dates are being pushed out. One E&P company described the market for higher specification drilling and completions equipment as especially tight in the Utica.

Nameplate regional E&P programs locked up rigs and stimulation services in late 2016, and that equipment is addressing incremental program expansion in first-half 2017. Otherwise, the spot market is tight, with wait time on stimulation crews out more than 60 days in all cases and beyond 90 days in a few cases. Smaller E&P companies, or those who moved cautiously when the market accelerated in late 2016, are finding access to services an impediment to implementing development programs. Most well stimulation providers are activating stacked equipment rather than importing new spreads into the region.

Wait times for stimulation crews have increased as zipper fractures rose to a 74% share of completions. The gain is consistent with what is happening across the U.S. as E&P companies address the backlog of drilled but uncompleted wells (DUCs) while simultaneously completing new wells as drilled. Industry players tell Hart Energy the industry reduced Appalachian DUCs by 6% during first-quarter 2017.

E&P companies are expecting service costs to moderate in line with commodity prices. Price per stage was rising at a slower pace ($53,000) in second-quarter 2017 and is up only 2% over the last 90 days. Regional per-stage pricing is up 28% year-over-year, mostly on higher proppant loading. More proppant now means more iron on site. The average size of hydraulic horsepower (hhp) necessary to stimulate a Marcellus well rose to 29,000 hhp in second-quarter 2017 and is up 16% over the last six months.

Pent-up demand exists for oil services in Appalachia, though at a slower rate of increase than evident over the last two quarters. The springtime 2017 run in natural gas prices has been enough to underwrite continuity in activity for the region’s prolific dry gas plays, while oil prices added sufficient uplift to liquids-rich targets in southwest Pennsylvania.

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