Exploration and production companies (E&Ps) in the Permian have made great strides in reducing key elements of their drilling and completion expenses. However, many E&Ps have struggled in their efforts to trim one key element: their frac sand costs, which can account for 20% or even 25% of the total bill per high-intensity well. Now, with new sand mines coming online in West Texas and with traditional Upper Midwest sand suppliers eager to protect their market share, many producers are looking for multiple ways to lower the total delivered cost of their sand while making the challenging tasks of sand delivery and handling much more efficient. Today, we continue our blog series on recent developments in the frac sand arena.
Since the Shale Revolution began, E&Ps in shale and tight-oil plays across the U.S. have been on a mission to ratchet down the cost of drilling and completing new wells and to increase hydrocarbon production per well. They’ve been remarkably successful on both fronts. With improved drilling technology and the trend toward multi-pad wells, among other things, drilling times (and drilling costs) per well are way down. And, as they have gained a more nuanced understanding of their hydrocarbon resources, producers and their pressure pumpers have been implementing increasingly sophisticated and well-specific completion strategies to wring ever-increasing volumes of crude oil, natural gas and natural gas liquids from their wells. These D&C gains have been particularly significant in the Permian, where E&Ps have largely figured out how to optimize production from the region’s multiple, stacked pay zones. Two key elements of their success, which we described in Faster Horses, are drilling longer horizontal wells or laterals (now often 7,500 or 10,000 feet, and sometimes longer) and intensifying completions with the use of more pressure, more frac sand per linear foot of lateral and more frac stages.
As we discussed in Part 1, Part 2 and Part 3 of our “Wipe Out!” blog series, the trend toward high-intensity completions caused sand demand — and prices — to soar, and prompted the rapid development of new sand mines in West Texas to help meet rising demand and to reduce sand transportation costs (by eliminating the cost of long-distance rail shipments and rail-to-truck transloading and storage). In the first part of this series, “All My Frac Sand Comes From Texas,” we said that Permian producers as a group now are consuming more than 40,000 tons of frac sand per day, a pace requiring the delivery of a fully loaded 24-ton sand truck to a Permian well site every 45 seconds or so. The blog also noted that close to 20 new potential sand mines are now in various stages of development in West Texas — two are already operating, with at least a few more scheduled to come online by the spring of 2018. All of these mines are within trucking distance of their Permian customers.
To access the remainder of All My Frac Sand Comes from Texas - Permian E&Ps Explore Ways to Rein in Sand Supply-Chain Costs you must be logged as a RBN Backstage Pass™ subscriber.
Full access to the RBN Energy blog archive which includes any posting more than 5 days old is available only to RBN Backstage Pass™ subscribers. In addition to blog archive access, RBN Backstage Pass™ resources include Drill-Down Reports, Spotlight Reports, Spotcheck Indicators, Market Fundamentals Webcasts, Get-Togethers and more. If you have already purchased a subscription, be sure you are logged in For additional help or information, contact us at [email protected] or 888-613-8874.