Synopsis

The good news is the Midcontinent pressure pumping market has stabilized in terms of demand after a first-quarter 2015 that mostly involved idling equipment and laying off crews. The bad news is pressure pumping service providers are working at below break-even pricing. In some instances, contractors are bundling ancillary services into a larger package that includes pressure pumping. Meanwhile operators are switching to less expensive completion techniques such as sliding sleeves. Average per stage price plummeted to below $20,000 versus $56,000 in the January 2015 report. Contractors believe it will take $70 oil to re-vitalize regional pressure pumping activity. Watch for the next Midcontinent pressure pumping report in July 2015.

Part I. – Survey Findings

Among Survey Participants:

  • Pressure Pumping Demand Down But Stable
    [See Question 1 on Statistical Review]
    ​All respondents reported that pressure pumping demand is low, but stable for the quarter. No increase in demand is expected until the price of oil nears $70. Respondents said pressure pumping activity for next quarter has been secured on rock bottom pricing.
    • Top-Tier Service Provider: “We had to lay down one fleet and layoff the crews for that, but we have stable work booked for remaining fleets this quarter.”
  • HHP Supply Excessive for the Region
    [See Question 2 on Statistical Review]
    ​Service providers reported that the current supply of pumping fleets is excessive because of decreased demand. Severe layoffs and fleet movements continue for both top tier and mid-tier companies.
    • Mid-Tier Service Provider: “We have gone down from five fleets to three in the region but we have a stable book of clients left. We have seen one of the Big Three companies shut down six fleets in the region.”
  • Total HHP Capacity Changing Quickly in Area
    [See Question 3 on Statistical Review]
    ​Only one respondent was able to estimate total HHP capacity in the area. He estimated the region to still have 1 million HHP, but none of the respondents could estimate how many crews are left to man the pumps.
    • Top-Tier Service Provider: “I know there are still too many fleets left in the region. Everyone still has open dates and crews worried about further cuts.”
  • Well Metrics: Vertical Depth Ranges 9,000-ft. to 15,000-ft. across the region
    [See Question 4 on Statistical Review]
    ​Average vertical depth in the Cana Woodford ranges between 9,000-ft. to 12,000-ft., according to respondents. In the traditional Woodford, vertical depth ranges between 10,000-ft. to 15,000-ft. Meanwhile, area-wide horizontal laterals average of 6,031-ft. and average number of stages is 18. Injection rates average 69 barrels per minute (bpm) with about five stages completed daily on a 24-hour schedule.
    • Central Oklahoma Operator: “We have completely quit drilling and completing the Woodford horizontals on our acreage at these prices and are only drilling some shallower conventional on our acreage for now. However, my buddies at [a super major oil company] have Woodford acreage to the south that they are drilling and completing without slowdown. They are building up reserves at these rock bottom prices, knowing that it is a great value long term.”
  • Average Cost Per Stage About $16,250, Down Dramatically QTQ
    [See Question 5a on the Statistical Review]
    The average per stage price is reported at $16,250, significantly lower than the $56,250 reported in the January report. Respondents explained that older contracts at higher pricing have now expired and all new work has been negotiated at much lower prices. Some respondents reported that pricing is often bundled with wireline and coiled tubing services to get rock bottom prices.
    • Mid-Tier Service Provider: “I don’t understand why anyone would delay a frack now. This is the cheapest anyone can afford to frack these wells. This price can’t go any lower.”
  • Stable Prices Expected QTQ
    [See Question 5b on the Statistical Review]
    ​All respondents expect prices to remain stable during the next three months. Some respondents believe that most pressure pumpers are now below break-even cost to keep crews working. All respondents said prices will have to go up when the oil price rebounds.
    • Mid-Tier Service Provider: "We are expecting prices will stay here and gradually go back up as oil prices recover.”
  • Operators Employ Tactics To Lower Costs
    [See Question 6a on the Statistical Review]
    Four respondents mentioned that operators are all demanding concessions to keep wells fracking in this environment. Several providers said they are offering rock bottom prices for those who agree to bundle pressure pumping, wireline and coil tubing services. Some operators are using sleeves and smaller stages in order to keep costs down.
  • Operators Delaying Completions
    [See Question 6b on the Statistical Review]
    All respondents reported that many wells are being drilled, but not completed until the oil price recovers. One operator believes there will still be a window of time in which low cost fracks will still be available even if oil prices get back in the $70 range and then the strategy of delaying fracks will end.

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 area. Participants included an oil and gas operator, a coil tubing provider, and six managers or sales personnel with well service companies. Interviews were conducted during late April 2015.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Midcontinent]

Total Respondents = 8

[Oil and Gas Operators = 1, Coil Tubing Manager = 1
Fracking Service Providers = 6]

1. Do you expect demand for pressure pumping equipment to grow, remain the same or shrink in 2Q2015 compared to 1Q2015?
Remain the same: 8


2. Would you characterize the supply of pressure pumping equipment in your area as excessive, sufficient or insufficient to meet early 2015 demand?
Excessive: 8

3a. What would you estimate total HHP capacity for the region?
Avg. total HHP* 1,000,000 HHP
*Only one respondent was able to estimate HHP; others reported too much change is taking place in the area for an accurate assessment.

3b. Have any new providers entered the play in the last 90 days?
No new providers 8

3c. Have any service providers left the play in the last 90 days?
Yes 8

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 are the average frack stages per day? Is this a 12-hour or 24-hour shift?
Midcontinent
Vertical Depth Ranges: 9-12,000-ft.
(Cana Woodford)
-15,000-ft.
(Traditional Woodford)
Average Horizontal Lateral Length: 6,031-ft. (area-wide)
Average No. of Frack Stages: 18
Injection rates (barrels/min): 69 bpm
Average No. of Frack Stages/Day 5/day
12-hr or 24-hr 24-hr

5a. What is the average cost per stage in your area now?
$10k - $15k 1
$15k - $20k 5
$15k - $50k 2
Average cost per stage: $16,250 per stage*
*Some respondents were still working on term contracts at higher prices during January’s report. Most contracts have now expired or been renegotiated at much lower prices.

5b. Do you expect fracking prices to increase, remain the same, or decrease over the next three months?
Remain the same (0%): 8*
*All respondents said prices are at “rock bottom” and will remain steady at that lower level the next three months.

6a. What strategies are companies putting into place to cope with a low price environment?
Demanding price concessions: 4
Bundling services for rock bottom pricing: 2
Sliding sleeves and smaller stages: 1
Delaying completions: 1

6b. What are you seeing in terms of the number of wells drilled, but not completed in your area?
*All respondents reported companies are delaying fracks, but could not estimate percentages or number backlogged wells

End Statistical Review

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