Monday, January 19, 2015

Oil: It's Cheaper to Refrack (SLB; HAL; WFT)

As anyone who spends way to much time at this stuff knows: Refracking is the not-so-well-known income stream where the real money lies for the service companies.*
From The Million Dollar Way:

Something To Think About: Re-Fracking And The Current Slump In The Price Of Oil 
On January 17, 2015, I posted a number of things to think about with regard to the current slump in the price of oil. Rigzone/Wood Mackenzie made this their #2 item on their list of things to think about with the current slump in oil price.

Refracs start to look better than new fracs: Over the past year, lower US natural gas prices drove Marcellus operators to shift attention to horizontal refracs in order to increase recovery rates at reduced costs (~25% lower expenses for a standard well). Successful refrac testing also took hold in gas-rich plays like the Haynesville and Barnett where some operators were able to re-set production rates to early life profiles and, in some cases, increase performance. 
Back in 2011, I started started blogging about MRO's program to re-frack. The linked Rigzone/Wood Mackenzie article only mentions natural gas but ....

In the Bakken there are currently 750 wells waiting to be fracked for the first time, according to the most recent Director's Cut, much, much higher than "usual" number of 350 to 450.

In addition it's my hunch there are 3,000 wells (and that estimate may be very, very low) that are candidates for re-fracking.
If interested, do follow that Jan. 17 link.

*See, for example:
Of Schlumberger, Asian Tigers and $10 Oil (SLB; HAL)
EIA Drilling Productivity Report (e.g. higher initial, faster decline in the Eagle Ford)
The RE-fracking Boom and the Second-best Correction Of the Day (HAL; SLB; BHI; WFT)

Back in 2012 we glanced at the coming refracking boom:
Frackers: Sterne, Agee & Leach on the Oilfield Service Stocks (SLB; CAM; OIS; HAL)

Something to remember: All of the natural gas wells that were fracked over the last couple years will have to be re-fracked as the production rates decline, some wells will get fracked three or four times over their expected lives. It's like an annuity for the service companies, something I've not heard any analysts talk about.... 
Natural Gas: The Astounding Production Decline Rates of Shale Wells 
I've mentioned we heard from landowners that their monthly royalty checks dropped 75% between month 1 and month 12 after completion. This is good news for gas bulls and good news for the well service companies who will be called in to re-frack the wells 4-5 times over their producing lives.
Not such good news for folks who want to see gas back under $2.00....