U.S. shale drillers and proppant producers seek new methods to tackle low prices

Drilling rig
Source: DollarPhotoClub

U.S. shale drillers need to get increasingly creative to continue to operate in the low oil and low gas prices environment. Much has recently been said about fracklog and the drive to refrack old wells. The most recent trend sees shale produces revisiting abandoned vertical wells.

In a recent piece, Oil & Gas Investor reports on U.S. drillers trying to produce crude oil from shallow mature fields, abandoning expensive horizontal drilling for cheaper vertical wells.

As the article points out, a  simple vertical well can be drilled or refracked for around $1 million. Wells with about 10,000 feet of horizontal drilling cost from $5 million to $9 million even at discounts available during the downturn, company presentations show.

“It makes more sense to develop vertical wells in a lower price environment because they are not growth plays, but they are a very strong cash flow asset,” said Benjamin Shattuck, principal analyst at Wood Mackenzie. “They are going to give you that cash flow that you need today.”

Other companies – like Murphy Oil Corp. or Whiting Petroleum – have been getting promising results by drastically increasing the quantities of sand used for production.

“I can’t control the price of the commodity,” Brett Pennington, Senior Vice President of U.S. land operations for Murphy Oil Corp was quoted as saying. “The only thing we can do is get better and faster and cheaper. There’s a general correlation that more sand equates to a better well.”

Meanwhile, Mark Williams – Senior Vice President of Exploration and Development at Whiting Petroleum – said at the American Association of Petroleum Geologists (AAPG) convention in June that he found there to be a “firm, strong correlation between higher volumes of sand and better production.”

This is certainly good news for the silica sand producers, although probably not good enough to save some of the smaller players, less able to adapt to the changing marketplace. While some have decided to lower the price as well as quality – with some E&P companies opting to go for cheaper brown sand rather than more expensive options – the bigger players bet on improved efficiencies with more technologically advanced products.

A good example would be Preferred Sands, which has recently launched a number of new products, the latest being “Heat 30/50” which was unveiled on Monday. The company launched a “Build a Better Well” Campaign, a pioneering new initiative aimed at increasing production while reducing costs for operators. Through the Build a Better Well Campaign, Preferred Sands tracks real well production reports and studies well designs throughout North America from proposal and completions to production, with the goal of providing operators with targeted feedback to optimize well designs.

“The Build a Better Well Campaign is helping us to understand exactly how our products perform in varying well characteristics, so we can make sound recommendations to our customers based on real results. This data allows us to stay ahead of the curve by determining the best possible proppant combinations, something most operators are not yet doing,” said Michael O’Neill, founder and CEO of Preferred Sands.

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