Efficiencies in horizontal well completions have accelerated over the past six months driven by the need for E&P companies to preserve return on capital in a low price oil environment. Some exploration and production (E&P) companies are showing significant efficiency and productivity gains. Expectations are that more will be achieved during 2015.
E&P Efficiencies Improving well productivity is a key focus for EOG Resources. EOG reports that well costs and well productivity both are exceeding targets for 2015. The company says that the economics of their business are better at $65 oil today than at $95 oil in 2012. Chesapeake Energy, in a June 23 investor presentation, shows a decrease in average drilling days down to 12 in Q1 2015 from 17 in 2014 and 25 in 2013. Chesapeake Energy reports an average cost of $205 per drilled foot, down almost 7% from $220 in 2014.
EIA Drilling & Productivity Trends This trend is also being reflected in government assumptions regarding productivity and output. The June 2015 EIA Drilling Productivity Report for the Eagle Ford estimates the increase in new (first full month) production per rig for the first half of 2015 to be 17% and 14% for oil and gas respectively. For both oil and gas, the total percent productivity increase for first half 2015 is the same as the full year 2014 increase in productivity. In other words we are producing more, with fewer resources.
Other oilfield plays are showing the same trend. This is in part due to greater efficiencies achieved by the E&P companies, and also likely due to the shuttering of equipment that lacks the capacity to drill and frack longer laterals and conduct enhanced completion techniques. The overall impact is the strengthening of the US position in shale oil and gas.
US Leads the Way In a recent report by Harvard Business School and The Boston Consulting Group, authors Michael E. Porter, David S. Gee, and Gregory J. Pope put forth that the US has a 10 to 15 year lead in commercializing hydraulic fracturing technology and that the industry’s efficiency efforts driven by the oil price decline may extend that advantage.
The report further estimates that “unconventional energy development contributes more than $430 billion to annual U.S. GDP and supports more than 2.7 million American jobs” and the US should make a more coordinated effort to take advantage of this energy opportunity.
Outlook for Proppant Demand The long term expectations for global and US energy demand are strong and proppant will be a necessary component to meeting those needs through fracking in US shale plays. Proppant Today sees a 40% increase in the market for proppant 2014 to 2020.
About Proppant Today, LLC
Proppant Today, LLC serves the proppant market by providing deep insights into proppant and frac sand use and demand in the unconventional oil and gas industry. We provide a daily news update at www.proppanttoday.com. We blog on frac sand, manufactured and coated proppant and its role in the supply chain of the unconventional oil and gas industry. Proppant Today will release the US Proppant Market and Forecast Report: 2015 to 2020 in July 2015.
– Laurie Parker, Senior Analyst, Proppant Today, LLCwww.ProppantToday.com