Synopsis

The Scoop and Stack plays remain the only game in town in the Midcontinent as regional drilling activity continues declining.

Completion activity had been steady year-to-date in 2016, thanks to the Scoop and Stack, although generally at very low levels. However, it appears rig count is beginning to weaken again in early May with activity in both plays down 10 rigs since early March to just 27.

Regional well stimulation capacity contracted during the first four months of 2016 to 300,000 in hydraulic horsepower (hhp) from more than 563,000 hhp. Similarly, crew count fell to just 13 in April from 25 in January.

For the Midcontinent, in general, well stimulation service providers say customers need $55 oil and $3.15 gas for completion activity to increase. Those prices are among the highest in the domestic market.

Survey respondents peg the average price per stage at $39,000 as contractors function in survival mode. This price is up from January, but reflects more completions in the deeper and higher-pressure Scoop and Stack plays in the Anadarko Basin and fewer completions in the Mississippi Lime, Granite Wash and other shallower Midcontinent zones.

Service providers do not think pricing will go any lower since contractors are already working below cost.

Service providers are also closely watching financially-challenged customers as payment cycle time increases. There has been at least one notable operator bankruptcy in the region—Midstates Petroleum.

Watch for the next Heard In The Field report on the Midcontinent well stimulation/pressure pumping market in July 2016.

Part I. – Survey Findings

Among Survey Participants:

  • Demand Flat Quarter-To-Quarter
    [See Question 1 on Statistical Review]
    ​Respondents concurred that demand during second-quarter 2016 has remained the same as it was in the first quarter when the volume of fracking work was extremely low. The majority of activity is in the Scoop and Stack areas, respondents reported.
    • Mid-Tier Service Provider: “Those of us who can handle the pressures of the Scoop have some stability in demand even if it is slow in comparison to the past.”
  • $55 Oil, $3.15 Gas Need For Activity To Improve
    [See Question 2 on Statistical Review]
    ​Among respondents, an average oil price of $55 and average natural gas price of $3.15 would be required for demand to increase and operators to return to completion activity.
    • Mid-Tier Service Provider: “While prices are where they are now, we are all in survival mode. No one will get excited about ramping up until oil is well into the $50’s.”
  • Several Companies Still Active In Midcon
    [See Question 3 on Statistical Review]
    The top three active fracking service providers, according to survey participants, continue to be Halliburton Co. (NYSE: HAL), Basic Energy Services Inc. (NYSE: BAS), and Cudd Energy Services, even though several fleets have left the area. Quintana Energy Services LP merged with Archer Well Co. during fourth-quarter 2015. Archer had serviced the Midcontinent area for a number of years.
  • HHP Capacity Estimates Continue To Drop, Crews Down
    [See Question 4 and 5 on Statistical Review]
    Respondents estimated that the average hydraulic horsepower (hhp) capacity in the region stands at about 300,000 hhp, down considerably from the 563,000 hhp reported in January. The number of crews working the area is estimated at only 13, down from about 25 estimated in January.
  • Midcon Metrics: Area-Wide Vertical Depth Averages 8,875 Feet, Lateral Length 7,875 Feet
    [See Question 6 on Statistical Review]
    ​Average vertical depth reported is 8,875 feet across all active plays in the Midcontinent. Average lateral length is 7,875 feet. Average number of stages is 34. Injection rates average 70 barrels per minute with about six stages completed daily on a 24-hour schedule.
    • Mid-Tier Service Provider: “The average horizontal job here still has enhanced completions on long laterals with large sand volumes. Methods are not changing much because they get good results, but number of wells is way down due to prices.”
  • Average Cost Per Stage In Region ~$39,000
    [See Question 7 and 8 on Statistical Review]
    ​The average per stage price is reported at about $39,000. Pricing is higher than the $33,000 per stage reported in January because of the higher costs associated with fracking deeper wells with higher pressures in the more active Scoop and Stack plays. All respondents expect fracking prices to remain the same during the next three months.
    • Top-Tier Service Provider: “Nobody is making money at these prices. We are all in survival mode.”
  • Most Respondents Say Slow Pay Is A Growing Concern
    [See Question 9 on the Statistical Review]
    Five of the service providers said operators tend to pay slower now, resulting in careful discussions and careful negotiations on each job to avoid potential 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 Midcontinent region. Participants included seven managers or sales personnel with well service companies and one manager with an oil and gas operator. Interviews were conducted during mid-April 2016.

Part II. – Statistical Review

Well Stimulation/Pressure Pumping

[Midcontinent]

Total Respondents = 8

[Fracking service providers = 7, Operators = 1]

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

Remain the same:

8


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

Number Of Responses

Gas Price

Number Of Responses

$45-$55

2

$2-$3

3

$56-$60

6

$3.01-$3.50

5

Average ~$55

8

Average $3.15

8


3. Which fracking service providers are the most active in your area?

Company

# of mentions

Halliburton:

8

Basic Energy Services:

8

Cudd Energy Services:

8

Weatherford International:

6

Schlumberger:

5

Tucker Energy Services:

2

Quasar Energy Group:

1


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

250,000-300,000 hhp:

4

301,000-400,000 hhp:

4

Average:

~300,000 hhp


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

10-12:

3

13-16:

5

Average:

13 crews


6. 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:

8,875 feet

Average horizontal lateral length:

7,875 feet

Average number of frack stages:

34

Injection rates (barrels per minute):

70

Average number of frack stages per day:

6

12-hour or 24-hour:

24-hour


7. 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:

~$39,000

*Cost is higher due to higher percentage work in Scoop and Stack plays where higher pressures and temperatures are prevalent.


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

Remain the same:

8


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

Yes:

5*

No:

2

*Pay schedules outlined during negotiations.


End Statistical Survey

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