Posted on 04/22/2015 10:30:44 AM PDT by ckilmer
(Reuters) - U.S. oil and natural gas companies have pushed down costs of fracking a shale well faster than expected, and if the trend holds up it could allow producers to keep working in oilfields that just months ago looked uncompetitive after the oil price crash.
A more than 50 percent fall in the price of crude oil since June has left oil and gas producers insisting on steep price cuts from oilfield service companies that provide everything from drilling rigs to hydraulic fracturing.
Oil is trading around $55 a barrel, and most U.S. shale fields are seen as having break-even costs of $40-$70 a barrel.
In fourth-quarter earnings calls, operators initially were looking for prices cuts for services like fracking of around 20 percent. Now those savings appear to be steeper.
"We're seeing costs fall more for fracking than drilling," Mike Bahorich, chief technology officer at Apache Corp told a CERAWeek breakfast meeting.
He estimates Apache's fracking costs have fallen about 30 percent, while drilling costs have tumbled 20 percent.
Gary Gould, senior vice president of operations at Continental Resources Inc said his company, which has its largest operations in North Dakota's Bakken Shale, had seen service costs "falling most steeply in recent weeks and months."
Analysts at IHS CERA expect fracking costs to fall 32 percent this year, down from a prior forecast for a decline of 24 percent.
Lower fracking costs, along with steep cuts to capital spending and a focus on drilling in only the most profitable areas in shale basins are helping producers weather the downturn.
"This represents significant savings for operators," said Christopher Robart, director of unconventional resources at IHS, but he cautioned the huge savings will not be repeated in 2016.
Falling costs and better takeaway capacity from new pipelines can allow producers to keep wells profitable in the face of low prices.
Pioneer Natural Resources Co, a top oil producer in the Permian Basin of West Texas, plans to take the unusual step of adding drilling rigs in June, its chief executive officer said on Tuesday in a bold show of industry optimism.
This week, Exxon Mobil Corp CEO Rex Tillerson said it was too soon to know if falling prices and a dropping U.S. rig count would slash crude output.
"We've seen price reductions but we've also seen improved efficiencies," he said. (Reporting by Anna Driver; Editing by Terry Wade and Chris Reese)
ping
Only Malthusians assume technology is a constant. Profit motive is very strong; thus, clever ways to lower costs will always be sought.
I LOVE THIS COUNTRY!! Innovation never stops. No one can touch us except a destructive president and congress, an the 45 percent moochers.
I HAD an original idea once. I was the FIRST soda machine vendor In the country to put Snapple CANS in vending machines. They had bottle machines then but no cans. I called Snapple and asked to buy a can machine, they nastily said “we don’t have them and never will!!” There are zillions of them now. Got sick of frequent mafia run ins an sold the route.
My understanding is at Eagle Ford they are drilling wells but not fracing them. 1800 wells
Great Earth Day News!.........................Frack, Baby, Frack!..................and keep on Fracking!......................
Reductions of cost claims can be dependent on how they are measured.
If it is the average cost per barrel produced, cost go down during slowdowns because only the best equipment gets used for the best portions for the fields.
During high prices, it becomes economic to produce from poorer areas of the field and use less efficient crews and equipment, driving the total average cost up.
CERAWeek: Oil tool makers say upstream discounts unlikely to climb high
http://fuelfix.com/blog/2015/04/21/ceraweek-oil-tool-makers-say-upstream-discounts-unlikely-to-climb-high/
In the last six months, oil-company breakeven levels have only declined 5 percent to 6 percent, and aren’t expected to fall nearly as far as producers hope, said Pritesh Patel, director of research at IHS, in a panel during the second day of the weeklong IHS CERAWeek energy conference at the Hilton Americas-Houston.
“There are huge expectation that costs will come down 20 to 40 percent, but in reality our expectations lower than this,” Patel said.
It’s hard to find room for 20-percent discounts on equipment when labor and specialty steel costs don’t change rapidly, said Douglas Meikle, president of valves and measurements at Cameron International, a Houston oil equipment manufacturer.
“We’re a publicly traded company,” he said. “It’s hard for us to find that kind of number.”
Mario Azar, CEO of Siemens’ oil and gas arm, said it isn’t possible to add 25-percent price reduction from his own manufacturing firm’s suppliers.
Bakken and other locations as well. Estimated 4,000 wells drilled and not completed at this time.
Two interesting notes though: i) only a limited subset of operators can even afford to talk about drilled but uncompleted wells and ii) the industry's DUC backlog to this point is only about 7% of the total wells drilled last year.
http://oilpro.com/post/12339/halliburton-president-sees-future-playing-out
10 Years ago could we have imagined this Energy Renaissance?
New ways of getting this energy will be invited that haven't even been imagine.
This "Peak Oil" stuff is a bunch of crap. That is pushed by the "We Can't/It can't be done crowd"
If we would have listened to them we never would have went to the moon!
Super Ping!
Still no earthquakes in NW and SE New Mexico. Been oil and gas drilling there for the past 70 years.
A plumber I know that made some good money in North Dakota came back because building is slowing down and competition is driving profitability down. Why live and work in a barren and sometimes frozen windswept plain if you aren’t making more than what you would have near home?
Yeah there were a couple years where median salaries in the oil patch were outpacing wall street median salaries. looks like they’re coming back to earth.
lower oil prices however are great for the rest of the USA & the world—as they act like a tax cut on the top line and improve profitability of many industries on the bottom line.
What matters most is from a security standpoint is energy independence, so we don’t have to play kiss-ass with Arab Sheiks, just to keep the oil flowing.
This is the beauty of having non-union employees. They have the choice of working at reduced pay after the boom-time salaries they’ve made, or not to have a job at all. Most prefer some to none.
The Hillbilly mafia runs vending machines in the Chicago area.
Let’s not count coal out, either.
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