Frac services costly, in tight supply, operators say

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, Nov. 30 -- Operators faced with costly delays in obtaining fracturing crews are considering their options, and some are assembling their own company-owned fracture stimulation fleets and also entering long-term service contracts.

Pioneer Natural Resources Co. said it’s expanding its integrated services in the Spraberry Trend and also in the Eagle Ford shale as part of a strategy to control drilling and production costs. The company plans to internally provide 30-60% of its service requirements by 2012.

Scott Sheffield, Pioneer chairman and chief executive officer, said vertical integration is expected to save Pioneer $200,000-300,000/well compared with utilizing third-party services.

A second company-owned fracture stimulation fleet has started operating in Spraberry, he told analysts in late October. Two additional fleets are being built, with one scheduled for delivery in the first quarter of 2011 and the second in the second quarter of 2011.

To support its fracture stimulation operations, Pioneer has contracts in place for its forecasted sand needs through 2015. Frac tank ownership will more than double from 250 tanks currently to 550 tanks by yearend, the company said.

Tubular requirements are contracted through 2012, and pumping unit requirements are contracted through 2011. In addition, Pioneer owns nine drilling rigs currently operating and recently acquired three more rigs expected to be operational by Dec. 31.

Four pulling units are being added, which will bring the total fleet to 23 units by mid-2011. The company also has hot oil units, water transport trucks, reverse units, and fishing tools to support its growing operations.

In the Eagle Ford, Pioneer is purchasing a fracture stimulation fleet that is expected to be in service by second-quarter 2011. Pioneer has a 2-year contract for third-party fracture stimulation services beginning in the first quarter of 2011.

BES boosts frac spreads
Basic Energy Services Inc. (BES) of Midland, a service company, reported robust demand from the Permian basin, Bakken, and Eagle Ford for its fluid service trucks.

Ken Huseman, BES president and chief executive officer, said, “Utilization in our well servicing segment showed the most significant improvement from September driven by activity in our oil-orientated operating areas, producing the largest number of rig hours and highest utilization since October 2008.”

Basic plans to add a 25,000-hp frac spread in early 2011 for the Wolfberry play. A spread includes the pumps, trucks, and related equipment.

“We believe the company could add one to two additional frac spreads later in 2011, increasing its exposure to the stimulation business,” Barclays Capital analyst James C. West said of BES in an Oct. 28 research note.

Unit Corp. of Tulsa reports 67% of its drilling rigs working during 2010 are drilling for oil or natural gas liquids and 88% are drilling horizontal or directional wells. Unit is a contract drilling business along with its oil and gas exploration and production business. It also has gas gathering and processing.

“Because of the increases in demand for drilling rigs capable of drilling horizontal wells, we are building four new drilling rigs,” said Larry Pinkston, Unit’s chief executive officer. He expects two rigs will be completed in the first quarter 2011 and the other two are to be completed during the third quarter.

“All four of these drilling rigs are 1,500 hp, diesel-electric, and will be operating under long-term contracts in the Bakken play,” Pinkston said. Unit’s drilling fleet totals 121 rigs of which 74 rigs are under contracts with 43 of those rigs having contracts ranging from 6 months to 2 years.

EOG considers options
EOG Resources Inc. said it has no plans to buy pressure-pumping equipment but that it’s contemplating its options given what its executives call an “unacceptable” tightness in availability of frac crews and equipment.

“We are discussing other avenues, and we have a plan that we will discuss” in mid 2011, Mark Papa, EOG chief executive officer, told analysts during a third-quarter earnings conference call. He reported waiting for months on fracturing services across most of its operating divisions.

“These delays won’t go away anytime soon,” Papa said. “The biggest improvement we see in the frac situation is if the gas rig count drops 200 rigs.” He forecasts that could happen around mid 2011 or later.

Papa said fracing delays hold up numerous wells simultaneously because EOG is developing clusters of wells in the South Texas Eagle Ford play where it expects significant production increases next year. EOG has a 10-rig drilling program throughout most of 2010 and plans to average 14 rigs in 2011.

El Paso Corp., Houston, said it has dedicated frac crews in place in its Eagle Ford and Haynesville plays. Brent Smolik, president of El Paso E&P Co. LP, said El Paso was “pretty well covered for 2011” with frac contracts for those two plays.

“We’re looking for frac crews now in Wolfcamp,” Smolik said (OGJ, Nov. 15, 2010, p. 25).

Southwestern Energy said it has a standing agreement for fracing services in the Fayetteville shale. The agreement comes up for pricing changes annually, executives said during a Nov. 4 conference call. Their current frac agreement expires Mar. 1, 2011.

Contact Paula Dittrick at

Related Articles

IHS: Eagle Ford completions pending

04/20/2015 US oil producers operating in the Eagle Ford shale in South Texas built an inventory of nearly 1,400 drilled but uncompleted (DUC) wells, said an a...

EOG Resources' budget down 40% to $4.9-5.1 billion

03/02/2015 EOG Resources Inc., Houston, plans a capital budget of $4.9-5.1 billion in 2015 including production facilities and midstream expenditures, represe...

EOG Resources’ budget down 40% to $4.9-5.1 billion

02/20/2015 EOG Resources Inc., Houston, plans a capital budget of $4.9-5.1 billion in 2015 including production facilities and midstream expenditures, represe...

PNR cuts capital spending nearly in half

02/11/2015 Pioneer Natural Resources Co. (PNR), Dallas, plans to spend $1.85 billion in 2015 following a fourth quarter in which the company reported a net in...

And now, the Watchies for 2014

01/05/2015 Before we get much farther into the new year, let's look back on the old. 2014 was disappointing in several respects, but there were some bizarre -...

EOG Resources sells bulk of Canadian assets

12/09/2014 EOG Resources Inc., Houston, has divested all its Manitoba assets along with certain assets in Alberta in two separate deals that closed on Nov. 28...

PNR, Reliance seek divestment of Eagle Ford midstream business

11/04/2014 Pioneer Natural Resources Co. (PNR), Dallas, and Reliance Holding USA Inc. are pursuing the divestment of their Eagle Ford shale (EFS) Midstream bu...

EOG Resources improves Eagle Ford completions

10/16/2014 EOG Resources Inc. said completion design advances in the Eagle Ford shale contributed to several noteworthy well results in the second quarter.

PNR head urges DOC to issue condensate export permits to others

10/15/2014 The head of an independent oil and gas company that in late June received one of the first two federal approvals to export condensate urged the US ...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts

On Demand

OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected