Newfield's Hand-Wringing Over the Cost of Fracking -- Some 'Splainin' To Do -- The Bakken, North Dakota, USA

 Update

November 16, 2011: Now, SM says their wells are coming in up to $2 million less than their Bakken competitors.

Well costs continued to increase. This is an area where we keep a very close eye on the margins. We are seeing well costs now $8.5 million to $9 million in our Bakken program and $6 million to $6.5 million in our Three Folks Gooseneck drilling program. I should point out one of the things that it is unique about SM Energy. We are seeing our Bakken wells coming in $1 million to $1.5 million, some cases $2 million less than some of the offset operators. Primary reason for that is we are still drilling 10,000 foot laterals, but as you may know we don’t complete with this many stages.

Wow, what a difference two weeks can make in the Bakken. At this rate, SM will have their costs down to $4 million, as long as they don't frack at all. Smile. 

Original Post: November 2, 2011

From Newfield's conference call regarding fracking:

Well, I think, first of all, I guess I would take issue with your comment on the well cost. We've put ourself out and compared our drilling curves and our costs against all the operators in the area. In each of the areas that we're active, I can tell you that we're very competitive as far as the wells that we're drilling. I will tell you that all our wells this year are proportionally much higher as a result of drilling the 1,000-foot laterals [sic]. Last year and even today, we can back off and drill a 4,000- to 5,000-foot lateral in the neighborhood of $7 million. Earlier this year, we were in an 8.5 to 9.3 environment. And we've seen that number go up to 11. Now the lateral lengths that we have today are between 9,000 and 10,000 feet. And I can tell you in the $11 million, there is some element of trouble cost that are built into that, that are a reflection of what we've seen in 2011. Now many of the costs that you historically see don't have trouble cost built into them. And in the environment that we're currently drilling today, you are far more likely to see increasing costs associated with that area than you are in areas where the rig count is much low. So that is a fully-loaded facilities, trouble cost, as well as drilling complete. Now as we look forward and you see some of the contracts that you have in place for stimulation services roll-off, and you see the basin moderate or more services come in, I fully expect that number will back off. But I'd be naive in thinking that if we would be seeing a $9 million well cost anytime soon.

From MRO:

We're basically targeting now between $8 million and $8.5 million per well. I would say that we have fixed contracts for our drilling and the 10 fracs a month that we have contracted. And so we're not as exposed to further upward pressure on the inflation side. Most of what we've seen in terms of driving our cost up have been the fact that we're now putting 30-stage kit in the ground, and all of our wells next year will be 30-stage frac jobs.

From Whiting:

Our well economics continue to remain robust. From January 2009 through September 30, 2011, we completed 115 Bakken wells with an average first six months production of 97,000 BOE. This average is 13,000 BOE higher than the second ranked Bakken operator and 50,000 BOE better than the average of the next 20 operators. We are currently drilling and completing wells in the Sanish field for approximately $6.0 million. Outside of Sanish, in other North Dakota areas, our completed well costs are currently running between $6.0 and $8.0 million and declining as we move into development mode. [These are all long laterals; short laterals used to cost as much as $6.0 million. Also, note: SLB expects fracking costs to decrease over time.]

From EOG:

"I (Mark Papa) had noted that on a few other competitors' earnings calls, they were talking about well costs in the Bakken for long laterals that I believe the numbers that were quoted are somewhere between $10 million and $12 million a well. Our well costs up there for a long lateral, 10,000 foot lateral, are more like $8.2 million to $8.3 million. So I can see where some people might have some pretty skinny economics if you're spending $10 million plus on these kind of wells."

From Schlulmberger:

In the Reservoir Production Group, deployment of HiWAY technology in the pressure pumping market continues to grow. In North America, the number of customers using HiWAY had grown from 2 only a year ago to more than 20 today, and we completed over 800 stages during the quarter in this market alone. HiWAY continues to deliver higher gas and liquid production, while using significantly less water and proppant compared to conventional fracturing systems. This provides us with significant pricing and cost leverage versus our competitors, a factor that will become even more important when the North America pressure pumping market eventually become saturated with hydraulic horsepower. I would also add that HiWAY is starting to gain momentum in the international markets, including Russia, North Africa and the Middle East.[Translation: pressure pumping market --> fracking; fracking will get more competitive over time; generally competition keeps pressure on prices.]