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 paulad@ogjonline.com.

Related Articles

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...

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.

Houston launches Energy High

03/10/2014 Last summer this editor had the opportunity to visit two corporate-backed oil and gas apprenticeship programs in Scotland. Aberdeen College and For...

Record Barnett HC content seen in combo play

12/02/2009 Hydrocarbon content in the thickest part of the Mississippian Barnett shale combo play in North Texas is so great that even 2-3% recovery is highly...

EOG sees reserve hike in Barnett Combo play

11/06/2009 Improved horizontal completion techniques in the North Texas Barnett Combo play have led EOG Resources Inc. to estimate that ultimate recoveries in...

Texas-East

11/06/2009 EOG Resources Inc. has expanded its acreage position in the Haynesville shale play to 153,000 net acres after adjusting for the expected exercise o...

Pennsylvania

09/22/2009

Seneca Resources Corp., Williamsville, NY, said its first operated Marcellus shale horizontal well averaged 5.8 MMcfd of gas over 6 days.

BLM begins scoping period for EOG Uinta basin gas project

09/09/2009 A 30-day public scoping period for a large natural gas infill project proposed by EOG Resources Inc. in eastern Utah will begin on Sept. 9, the US ...

Lower E&P spending ends 6-year global rally

12/20/2008 Global spending for exploration and production is expected to decline 12% to $400 billion in 2009—"a reversal after 6 years of global growth,"...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


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