Frackers Surprising Themselves How They Keep Squeezing Out More Oil Per Rig -- August 3, 2016

Updates

August 5, 2016: from Bloomberg, "the next shale boom will be built on sand." It is reported in the original post below.

Original Post

Reuters/Rigzone link here.

Nimble U.S. shale oil producers continue to show an uncanny ability to squeeze more and more crude from new wells, allowing them to do more with less as they try to weather another dip in oil prices to $40 a barrel.

Comments from Noble Energy, Devon Energy and Occidental Petroleum on Wednesday were significant because only six months ago many analysts were fretting that shale producers had hit a wall after slashing costs and lifting well output by as much as 50 percent since the steepest price crash in a generation started in mid-2014.

Now, while acknowledging that most oilfield services costs cannot fall further, these companies say they are still seeing output gains from improved well designs and fracking techniques. The rising well output means they can produce more oil with each dollar spent. This could help them survive the latest slump in oil prices back to multi-year lows after a partial recovery brought crude back up to about $50 a barrel.

Initially, Noble expected to get 390,000 barrels of oil equivalent per day (boe/d) this year on spending of $1.5 billion. Now it expects to spend less and produce 415,000 boe/d.

Lately the company has experimented with fracking wells using 3,000 pounds of sand per foot, several orders of magnitude greater than frack jobs a decade ago.

Companies have also been fracking even more parts of rock around a wellbore, boosting output. At Occidental, Chief Executive Vicki Hollub said 2016 production would now be at the high end of its forecast for a 4 to 6 percent increase from 2015 levels of 652,000 boe/d - without raising budgeted spending of $3 billion.

9,000 feet horizontal x 3,000 pounds/foot = 27 000 000. 27 million lbs of sand. Hmmmm..... not seeing nearly that much in the Bakken. 

415,000 boepd x 365 = 151,475,000 boe over a calendar year. $1.5 billion / 151,475,000 boe = $9.90 / boe in production costs. Hmmmm....

Note: I often make simple arithmetic errors. Don't make any financial, investment, travel, relationship, or job decisions based on what you read here. If this information is important to you, go to the source. 

And then look at this from Bloomberg/Rigzone:

Amid the gloom and doom that’s set in all along America’s shale fields these past two years, there has been one small, but consistent, bright spot.

Sand, it turns out, is a much greater tool in hydraulic fracking than drillers had understood it to be.

Time and again, they’ve found that the more grit they pour into horizontal wells -- seemingly regardless of how extreme the amounts have become -- the more oil comes seeping out.

The message from drillers is "more, more, more sand," said Sean Meakim, an oil-services analyst at JPMorgan Chase & Co. "All of the numbers are going up and they’re going up dramatically."

On a per-well basis, sand use has doubled since 2011, climbing to nearly 8 million pounds.

It’s this growth that’s sent the stock prices of the country’s four publicly traded sand miners surging more than 90 percent this year. True, overall sand usage in the fracking industry is still way down from the 2014 peak -- more than three-quarters of America’s drilling rigs, after all, have been idled since oil prices collapsed -- but the per-well increases have analysts and investors betting that the sand industry will boom again as soon as fracking activity starts to pick up even a little bit.

I can't say for sure, but this well might have set the record for most sand used in fracking in the Bakken:

• 22487, 67, EOG, Hawkeye 02-2501H, 69 stages, 27.6  million pounds, according to a reader, extended long lateral (3 sections long); t12/13; cum 623K 6/16; it's been off-line the last couple of months due to fracking / completions in neighboring wells; before that, it appears that EOG cut back on production from this well.

Generally, it appears operators are drilling long laterals (two sections, about 9,000 feet) and using between 1 million and 8 million lbs proppant. I am somewhat surprised by the relatively small amount of sand currently being used in the Bakken. There may be a couple of story lines there.