Decade of efficiency gains deliver the most commercial wells in US shale’s history
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Rystad Energy Webinars We are adapting to the current digital workplace and hosting numerous webinars going forward, some on short notice. Follow our webinar page to make sure you don't miss out on any relevant content for you. *** Shale Webinar: Shale financing and energy transition risks for the upstream sector Session 1: April 29 at 9:30 AM CDT Session 2: May 5 at 1:30 PM SGT >> Learn more and register Second Annual Americas Digital Energy Forum: A virtual morning on energy knowledge sharing May 19 at 9:30 AM CDT >> Learn more and register
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Rystad Energy Press Releases • Permian oil output set to grow in Q2 as fracking reaches 12-month high; flaring lowest since 2017 >> Read here • Gas flaring at US oil refineries reached highest on our record, non-upstream flaring sets 18-month high >> Read here
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Rystad Energy Product Highlights • Shale Analytics With Shale Analytics our clients gain a timely and comprehensive overview of the latest developments and forecasts within the shale sector, including productivity metrics for drilling, completion, fracking, well productivity and well economics, the shale financing with a focus on capital structure and company hedging. Our frequent commentaries provide invaluable analysis of the selected topics. >> Learn more
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• ShaleWellCube ShaleWellCube provides access to high quality oil, gas and water production data, estimated NGL volumes, and insights into the latest flaring trends. Our near real-time satellite-based oilfield activity monitoring allows clients to get a 360-degree perspective of the market, from drilling and completion operations to production and project design data, all of which can be correlated with well performance. >> Learn more
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• Shale Intelligence This report provides users with unique insights into supply and demand of key service segments of the US shale industry. With Shale Intelligence our clients will get quarterly insights, providing the latest updates on market developments with five-year forecasts of specific well services markets within US Shale. Shale Intelligence provides an industry overview of drivers behind drilling and completions activity, detailed analysis, and forecast of the global frac services market, the US frac sand market overview, analysis of the US oilfield water management market as well as an overview of the US stimulation chemicals market. >> Learn more
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An overwhelming amount of attention has been paid to the US tight oil industry’s financial wellbeing following the unprecedented Covid-19-induced downturn of 2020, while the aspect of operational efficiency gains made over the same timeline has been somewhat overlooked. Rystad Energy has closely tracked the tight oil industry’s continuous learning curve, and in this commentary we would like to highlight some of the key trends that are emerging, which are set to take the sector to a new level of operational maturity. Lateral length is still increasing, nationwide average surpasses 10,000’ The industry continues to switch to longer laterals in nearly all major US oil & gas basins, and no inflection point has been reached so far even though it has been a decade since that start of this fundamental trend. Shorter 1-mile lateral completions have become nearly non-existent by now, with only 13% of all horizontal completions from 2020-1Q21 exhibiting perforated lengths of under 6,000’. However, the industry is more frequently testing ultra-long laterals, of 2.5-3 miles, in recent quarters. We saw the market share of 11,000’+ laterals increasing from less than 1% in 2014-2015 to around 8% in 2018-2019, which has subsequently surged to a staggering 19% in 2020-1Q21. Lateral wells of 3 miles are also now being tested and adapted successfully even in basins which historically lag the country’s average perforated length – such as Delaware New Mexico. In that basin, we are now tracking second-month production data for two of the new 3-mile laterals by Devon, each recovering 190,000-200,000 barrels of oil in the first two production months. Bearing this in mind, preliminary 1Q21 data suggests that both the average and P50 perforated lateral length is surpassing 10,000’ for the first time in the nation’s history. The interquartile range has really narrowed in recent quarters as 1-mile laterals have lost market share quickly. The same observation is true for the Permian Basin, where the P50 lateral length has gradually crawled up, from 9,400-9,600’ in the first half of 2019 to 10,200’ in the first quarter of this year. It should be noted that Midland P50 laterals are now trending toward 11,000’, while 50% of Delaware completions also demonstrate laterals in excess of 10,000’.
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Frac sand intensity – generally stable, but horsepower-hours per well touching new records While operators are still switching to longer laterals, it has been a while since we have seen significant adjustments in sand or frac fluid intensity on acreage positions that were on a full-scale development mode several years ago. To be sure, some best practices were established across most basins in 2017-2018 and only marginal changes in frac sand intensity have been observed since then. Most Permian operators ended up staying on the same frac sand intensity level when they switched from Northern White to in-basin grades and thorough case studies conducted in 2018-2020 revealed little to no degradation in well performance. If there was any, it was more than compensated by the significant cost savings made from using in-basin sand. The upper quartile of the nation’s frac sand intensity has been fairly stable, at around 2,400-2,500 pounds per foot, since early 2018, while sand intensity on average still increased in that period. This was mainly driven by a change in mix of different basins – the contribution of Permian versus gas versus other oil regions to total activity, for example – rather than any fundamental change in sand intensity requirements in each basin. Frac fluid intensity has generally followed sand intensity trends in recent years, with not much changes either, but as lateral length extended and activity generally shifted toward deeper wells, pumping intensity (horsepower-hours) per well has increased steadily. In the second half of 2020 and the first quarter of this year, we are seeing a record-high nationwide average pumping intensity of 1.4 million-1.45 million horsepower-hours. Big recent shifts in the average have been driven by both a higher weightage of gas basins like the Appalachia and Haynesville, which tend to have higher pumping intensity than wells in the Bakken or DJ Basin, and also a structural increase in the Permian.
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Drilling and completions faster than ever before – cost efficiencies to be sustained in 2021 Much has been said about the recent improvements in the drilling and completion speed of tight oil and shale gas in the US. Standardization of operations and high grading of equipment are viewed as the two key factors pushing both the TMD footage drilled and lateral footage completed per day higher almost every quarter. As of the first quarter, a typical US unconventional project is drilled at a speed of 1,300’ per day and fracked at 1,850’ per day. For comparison, both these numbers were generally in the 900-1,100’ range in 2017. We recently covered the increased adaption of simul-fracs in the completion process to specifically highlight the rise in fracking speeds. This data is now updated continuously, with every daily release of ShaleWellCube. In 2020, we identified 70 Permian wells that were completed using simul-frac techniques. In the first two months of 2021, we have already seen 62 simul-frac operations, based on well count, in the Permian. More importantly, testing simul-frac operations has becomes really widespread among larger operators. As many as six E&Ps completed their first ever Permian simul-frac project in January-February 2021. In comparison, seven new comers were recorded in all of 2020. Increased US onshore activity in recent months has been accompanied by some recovery in service pricing in the spot market across all segments. Many service companies and suppliers are on track to see a modest recovery in their margins in 2021, though they are also experiencing input cost inflation as prices of materials are increasing along with labor cost. E&Ps have generally budgeted a 5-15% service cost inflation for 2021, but we believe that continuous efficiency gains, along with the lag between the recovery in the spot market getting reflected in term contracts, will help the industry keep its average drilling and completion costs per foot at record-low levels in 2021. An average horizontal well is currently drilled and completed at a cost of around $700 per foot of lateral length.
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