Synopsis

Operators now cutting completion budgets on the heels of prior cuts to drilling as the well stimulation sector enters a capacity oversupply scenario. Some service providers now operating at cash costs as per stage pricing falls. Per-stage pricing in the Midcontinent averaged $56,200 in the current survey, down from $89,000 in the October 2014 survey. More than half of survey respondents believe pricing has hit bottom with the remainder suggesting pricing could go lower yet. Fleets are on the move and regional well stimulation capacity in flux, though total regional horsepower has dropped sequentially this quarter. Watch for the next report on Mid-continent pressure pumping in April 2015.

Part I. – Survey Findings

Among Survey Participants:

  • Pressure Pumping Demand Declining Rapidly [See Question 1 on Statistical Review]. All respondents reported that demand continues to decline in line with falling oil price.
  • HHP Supply Excessive for the Midcontinent [See Question 2 on Statistical Review]. Service providers reported that the current supply of pumping fleets is excessive because of decreased demand. Most operators have already reduced the number of drilling rigs and are now severely cutting completion budgets as well.
    • Mid-Tier Service Provider: “We have seen everyone scrambling to stay busy and survive. There will definitely be oversupply for current demand until the oil price rebounds.”
  • 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 have a total 1.5 million HHP; other respondents said there are lots of fleets moving or parked and it is too early to know what the final HHP capacity tally would be until the market settled down.
    • Top-Tier Service Provider: “I don’t know anyone who has definitely left, but there are lots of changes. It is too early to know where the fleets all end up.”
  • Well Metrics: Vertical Depth Ranges 9,000-ft. to 11,000-ft. in Cana Woodford, Scoop and Stack plays [See Question 4 on Statistical Review]. Average vertical depth reported is 9,000-ft. to 11,000-ft across the Cana Woodford, SCOOP, and STACK plays. Meanwhile, area-wide horizontal laterals average 6,917-ft. The average number of stages is 31 per lateral. Injection rates average 78 bpm with approximately six stages completed daily on a 24-hour schedule. Sleeve/coil fracs are completed with an average of 28 bpm and 11 stages per day.
    • Cana Woodford Operator: “We have definitely added more and bigger stages in our wells in the deeper Cana Woodford play. We believe the production results require it now.”
  • Average Cost Per Stage ~$56,250 [See Question 5a on the Statistical Review]. The average per-stage price is $56,250 and decreasing. Some respondents reported that pricing is still at higher rates for pressure pumping units on long-term contracts; others said spot work or new work was being negotiated at much lower rates. Most survey participants mentioned that prices have dropped to “rock bottom” rates to keep working in this environment.
    • Mid- Tier Service Provider: “I am trying to get operators to see that we are offering ‘rock bottom’ prices to keep working. Hopefully they see this as an opportunity to complete wells for less and hold on for price to rebound.”
    • Mid-Tier Service Provider: “Our current per stage price is about $38,000 per stage. We provide coil fracs or standard plug and perf jobs for about this price. We are essentially breaking even to keep going. We all hope to hang on until oil rebounds.”
  • Decrease in Prices Expected QTQ [See Question 5b on the Statistical Review]. Four of nine respondents expect prices to decrease during the next three months; the other five respondents believe prices will remain the same because they have dropped to the bottom already. All reported that prices will have to go up when the oil price rebounds.
    • Smaller Service Provider: "We are expecting prices to stay down until oil price recovers, but our price will have to follow oil back up.”

Survey Demographics

Hart Energy researchers completed interviews with nine industry participants in the well stimulation/pressure pumping service segment in the Mid Continent area. Participants included one oil and gas operator, one completions equipment provider, and seven managers or sales personnel with well service companies. Interviews were conducted during late January 2015.

Part II. – Statistical Review Well Stimulation/Pressure Pumping [Mid-Continent]

Total Respondents = 9 [Oil and Gas Operators = 1, Equipment Supplier = 1, Frack Service Providers = 7]

1. Do you expect demand for pressure pumping equipment to grow, remain the same or shrink in 1Q15 compared to 4Q14?

Shrink: 9

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

Excessive: 9

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

Avg. total HHP*: 1,500,000 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: 9

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

Not sure: 9

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 frac stages per day? Is this a 12-hour or 24-hour shift?

Mid-Continent

(Focus on Cana Woodford, Stack, Scoop plays)

Vertical Depth Ranges: 9,000-11,000-ft.

Average Horizontal Lateral Length: 6,917-ft. (area-wide)

Average No. of Frack Stages: 31

Injection rates (barrels/min): 76 bpm for P&P, 28 bpm for coil fracks

Average No. of Frac Stages/Day: 6/day for P&P, 11/day for sleeves

12-hr or 24-hr: 24-hr

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

$35k - $65k: 1

$36k - $40k: 2

$40k - $50k: 2

$70k - $80k: 2

$75k - $100k: 1

No response: 1

Average cost per stage: $56,250 per stage*

*Some respondents still working on term contracts at higher prices; others renegotiating prices lower

5b. Do you expect fracking prices to increase, remain the same, or decrease over the next 3 months?

Remain the same (0%): 5*

Decrease (no % estimated): 4

*5 respondents said prices are at “rock bottom” and will remain steady at that lower level the next 3 months.