Halliburton and Black Rock to spend $500 million on refracking projects

Halliburton Headquarters
Source: DollarPhotoClub

Halliburton has teamed up with private equity giant BlackRock to fund up to $500 million in refracturing (refracking) projects over the next three years. The No.2 oilfield services company in the world – in the process of acquiring the No.3 company, Baker Hughes – is betting hard on a technology that, although promising, has not been perfected yet.

Earlier this month, an IHS study argued that horizontal well refracturing technologies will likely remain a niche market in the U.S. until significant technical and financial risks can be reduced.

Christopher Robart, managing director, unconventional resources at IHS Energy, and the report’s lead author, said at the time: “What refracturing needs now is a new innovator to step up, invest capital, and take risks to refine the technologies and lower costs.”

Halliburton might just be the innovator the industry has been waiting for.

During the company’s second quarter conference call, Jeff Miller, Halliburton’s President and COO, did not hide his enthusiasm for the technology:

“Though a relatively small market today, we see significant runway for refrac in the future. There is an opportunity to address the needs of operators to increase their production and expected ultimate recovery from the tens of thousands of unconventional wells drilled over the last several years. And we anticipate that customers will begin to dedicate a percentage of their annual spend to re-fracturing operations,” he said.

He also said that he was pleased to be cooperating with Black Rock, an arrangement that will allow Halliburton “to focus on candidate selection, execution and generating best-in-class returns while allowing BlackRock to pursue innovative opportunities with their clients.”

“When the recovery does come,” he continued, “it is our belief that North America will respond the quickest and offer the greatest upside. And when that happens we are confident that Halliburton will be the best positioned to outperform in the recovery phase of the cycle.”

According to Dave Lesar (President and CEO) the recovery can be expected rather soon with a “modest uptick in activity during the second half of this year, which could include increased refrac activity.”

Halliburton is not alone in its interest in refracturing. Both Schlumberger and Baker Hughes have been vocal on the benefits of the technology, with Devon Energy and Chesapeake already using it to revive output from existing wells.

Also, earlier this month, Chris Heinson, the senior vice president and COO of Sanchez Energy revealed that the company expects to spend between $1 million to $1.5 million per well when it starts carrying out its first horizontal-well refracks later this year. The company expects the procedure to result in as much as $2.5 million-worth of extra oil and gas from the currently depleted wells.

For now the markets are viewing Halliburton’s commitment to refracking with interest. The company’s shares rose 2.7 percent to $41.05. Halliburton’s net profit slumped 93 percent to $53 million in the quarter. Total revenue fell 26.5 percent to $5.92 billion.

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