[ROCKMAN]

Dashter - "Rig productivity has increased but average well productivity has decreased. Every rig used in pad drilling has approximately three times the impact on the daily production rate as a rig did before pad drilling. At the same time, average well productivity has decreased by about one-third. This means that production rates will fall at a much higher rate today than during previous periods of falling rig counts." You got me: I don't understand hat they're saying. I suspect þhey don't either. LOL.

A rig drills a well. Doesn't matter if 6 wells is drilled from 6 different locations or 6 wells from the same location: that rig drills 6 wells in either case. IOW that rig has the same impact by drilling the same number of wells. Drilling the 6 wells will save some moving costs but that doesn't change the impact. In fact, pad drilling requires a bit more irectional drilling which is a high cost component. It almost sounds like they think rigs drilling from a pad are different the other rigs. For the most part they are the same rigs.

In any case stacking a rig means it won't be drilling those 6 wells. Doesn't matter if they were going to be drilled from one location or six locations. The well count still drops the same either way.

[dashster]

Thanks Rockman.

[Pops]

$this->bbcode_second_pass_quote('dashster', 'D')oes anyone understand this post regarding fracking, rigs and pad drilling.

http://petroleumtruthreport.blogspot.co.uk/

It says the average rig on a "pad" drills three wells on average and says that means that each rig going away means you lose 3 wells, not one. But the rig can't be drilling all 3 at the same time can it? Whether they drill 3 wells from a single location or 3 locations, don't they all have to happen sequentially? I don't get it.

[dashster]

$this->bbcode_second_pass_quote('Pops', '')$this->bbcode_second_pass_quote('dashster', 'D')oes anyone understand this post regarding fracking, rigs and pad drilling.

http://petroleumtruthreport.blogspot.co.uk/

It says the average rig on a "pad" drills three wells on average and says that means that each rig going away means you lose 3 wells, not one. But the rig can't be drilling all 3 at the same time can it? Whether they drill 3 wells from a single location or 3 locations, don't they all have to happen sequentially? I don't get it.

[ROCKMAN]

Guys – It’s a somewhat complicated dynamic. Drilling multiple wells from one pad saves the rig moving time. But it takes a bit more hole drilled for each of those extra wells then the first well. But the big improvement has been the increase in the drilling rate: penetration rates (feet of hole per hour) have more than doubled from when they started. But they've also increased the length of the laterals significantly also so there's a lot more feet being drilled and thus more time. But longer laterals allow more frac stages which can increase productivity and that gives the appearance of greater efficiency but not really since you're now comparing apples to much more expensive oranges.

I also thought I should clarify another complication: when it's reported that the rig count in S Texas has dropped 100 that doesn't mean those 100 rigs will never drill another EFS well. Some of those rigs might be sitting on a location waiting to mob to the next when that location is ready. So the rig that just drilled an EFS well may, in a week or two, will drill another EFS well…or maybe several of the same pad. But if it's sitting there waiting to mob when they update the count it will be part of the drop rig count.

The critical metric is the "stack count". Unfortunately there's no one keeping that metric for all the contractors. I might hear that Drilling Company X has stacked 3 rigs but I don't know what all the other drillers have done. And there's generally two kind of "stacks". "Hot stacked" means the rig isn't drilling but can be mobilized quickly if they get a call to poke a hole for an operator. Sometimes if an operator allows it the rig might be left waiting on the last location it just drilled. Or sitting on the side of the next location waiting for it to be completed. In either case it’s not counted as a rig drilling. A "cold stack" is a very meaningful metric: the rig is moved to the driller's yard and the equipment is essentially mothballed and most, if not all, of the hands who worked on that rig are cut loose. It takes time to get such a cold stack back into action as well as find qualified hands to man it.

We'll see the rig count drop. But the best indicator of what the insiders expect would be the cold stack metric which, except for spotty reports, we'll never see an industry wide number.

[Pops]

Thanks ROCK. So just a WAG, does the increased penetration rate then offset the longer bore length?

And, if you just need something to do, could you give a brief lecture on how the faster drilling is accomplished?

[ROCKMAN]

Pops - Simply faster "P" rates mean less time on location. Dropping from 30 days to drill a 2,000' lateral to 15 days to drill a 5,000' lateral saves a lot of money when you're burning $150k to $250k per day.

More efficient down hole direction drilling equipment accounts for a lot of the improvement along with the learning curve. Search "rotary steerable" for more detail.

[ROCKMAN]

Some days ago I commented on the oil patch "missing". Missing in a dark slant analogy of the unknowns who went missing years ago as a result of S American death squads. Everyone hears about the Halliburton's and Schlumberger laying off thousands. But there are thousands of small companies with 100 employees or less. And they are taking big hits. The last two days I've been leaning out an obstructed production tubing with a "coil tubing unit". Search if curious. CT units were often used in the Eagle Ford. The hand running the equipment had been promoted to sales manager for the district a year ago. So it was him and the other 36 employees in the district office. Now there is only that one hand left. A month ago they cut 15 loose. And last week the let the others go. He also told me about him and a number of other salesmen meeting with one of the big operators in Texas. They made it real simple: they were going to prices for services as they did in 2004 and not a penny more.
And out on a well another hand told me about the downturn at another company's district office. They just didn't cut loose a bunch of hands: they shut the entire yard down. Mothballed the equipment, locked the gate and drove away.

The EIA etc can make all the rig count projections they want using whatever logic they want. But the service companies are hearing directly from the operators and their expectations of future activity.

[toolpush]

Rockman,

What you are saying is, the 91 rig drop this week, is the beginning, not the end? lol
In a lot of ways the shorter and sharper the better.
Next week, we get to see the shale players final quarter results. And that is going to be a fantastic quarter compared to what comes out in April.
I wonder how long before the "experts" catch on to the final result?

[Subjectivist]

$this->bbcode_second_pass_quote('toolpush', 'R')ockman,

What you are saying is, the 91 rig drop this week, is the beginning, not the end? lol
In a lot of ways the shorter and sharper the better.
Next week, we get to see the shale players final quarter results. And that is going to be a fantastic quarter compared to what comes out in April.
I wonder how long before the "experts" catch on to the final result?

[shallow sand]

In our area almost all service equipment has been brought back to the yard. Kind of what I thought would happen, they waited till after Christmas to drop the axe on employees.

Only work going on would be what it takes to keep the good wells running. Rates have dropped some. Chemicals haven't dropped yet, though. Electric won't drop, of course.

No drilling period.

It is surprising to me how bad Q4 2014 is coming in for public co so far. We did very well, but I guess I am looking on a cash basis, so oil revenue is one month behind. If low prices hold through March, I bet Q1 2015 for public cos will be brutal. We are talking big losses across the board.

[ROCKMAN]

Shallow - As far as the drilling side goes I should be able to post some hard first-hand facts in the next few months. I'm working on the economic analysis of a new play that I hope will help my company survive. This project will utilize the same rigs and frac equipment used in the Eagle Ford. As you can imagine I'll be forcing the service companies to their knees when it comes to cost. How they respond will be the best indication of the evolving dynamic. The "experts" can predict rig counts and production rates all they want. The folks I'll be dealing with are living it and not drawing charts behind some desk in a think tank in Georgetown.

Yes: forcing them to their knees. It ain't personal...just business. LOL.

[ROCKMAN]

And here are the words from the horse's mouth compared to the think tank "experts". So while the "experts" are predicting a 25% drop in rig count a company that actually drills wells is expect about a 30% drop...during just this quarter. And that decrease is from an already decreased number.

Reuters - Driller Helmerich & Payne Inc said it may cut 2,000 jobs as it begins to idle rigs amid a slide in crude oil price. H&P had about 11,901 employees as of Sept. 30. It has benefited so far from robust shale drilling activity in the United States. Oil producers are cutting budgets and slowing exploration activity, hurting H&P and other companies that provide rigs and services used in drilling. H&P said less than 200 rigs would be active by the end of the current quarter, down from over 297 in the first quarter. "The rig count reduction thus far has been more swift than many expected," Chief Executive John Lindsay said on a post-earnings call. H&P said it expects revenue and margins for U.S. land rigs to decrease in the second quarter. The company said it expected rig revenue in its U.S. land drilling unit to average $27,000-$27,500 per day in the second quarter, below the $29,457 it recorded in the first quarter.

{Wishful thinking IMHO. I've already heard of rates of formerly $22k/day being dropped to $14k/day.}

[ROCKMAN]

I probably should mention that statements from H&P should carry a lot of weight: As the most active U.S. Land contractor H&P holds leading positions in many of the major shale plays and oil & gas basins, such as the Permian Basin, Eagle Ford Shale, Bakken Shale and Niobrara Shale. More than 90% of their active rigs are drilling horizontal or directional well paths. In addition to offshore and international rigs the have over 400 US land based rigs. They are THE shale drilling company. They have the best insider view of what's going in the shales then anyone including individual operators like EOG, Chesapeake, etc. Those companies know their individual plans. It's H&P business to know what EVERYONE is planning.

[Subjectivist]

U.S. 6 February 2015 count 1456
Decrease from last week. -87
Decrease from a year ago -315 from 6 February 2014


http://phx.corporate-ir.net/phoenix.zht ... tsoverview

[Tanada]

http://phx.corporate-ir.net/External.Fi ... U9MQ==&t=1

I find it easier to look at the pdf link that I copied above and I am kicking myself because I was planning to update this thread as soon as the report came out. Unfortunately I got distracted with a flood of things happening here and forgot.

[ROCKMAN]

There's some data there many will overlook because they re focused on just the shales. Check the year old stats for VERTICAL oil and NG sells being drilled. This gives a very clear picture of conventional oil/NG development even with $95/bbl oil and NG selling for 170% more then the current price: excluding offshore wells we had only 335 rigs drilling. Yes: fewer shale wells will be drilled but how many rigs will be drilling conventional oil and NG with them selling for about half the price they were a year ago?

If nothing else those numbers should clearly explain why the pubcos threw so much money at the shales: they had little else to drill for.

[Tanada]

$this->bbcode_second_pass_quote('ROCKMAN', 'T')here's some data there many will overlook because they re focused on just the shales. Check the year old stats for VERTICAL oil and NG sells being drilled. This gives a very clear picture of conventional oil/NG development even with $95/bbl oil and NG selling for 170% more then the current price: excluding offshore wells we had only 335 rigs drilling. Yes: fewer shale wells will be drilled but how many rigs will be drilling conventional oil and NG with them selling for about half the price they were a year ago?

If nothing else those numbers should clearly explain why the pubcos threw so much money at the shales: they had little else to drill for.

[Pops]

$this->bbcode_second_pass_quote('ROCKMAN', 'C')heck the year old stats for VERTICAL oil and NG sells being drilled.

[ROCKMAN]

T - "Whats the difference between horizontal and directional?" No official definition I'm aware of. The importance distinction is the nature of the completions. I've drilled many dozens of directional wells for various reasons. But not one for the reason the shale players drill hz wells. Everyone one of my directional wells developed conventional reservoirs. In fact, because of surface location restrictions, a significant % of wells drilled in S La were directional. A directional well might be drilled to 10 degrees from vert or 60 degrees. But they're still just directional. And a hz well might only be drilled to 70 degrees from vert and not 90 degrees but if it targets fractures in an unconventional reservoir it should still be classified as hz.