US oil companies, under renewed pressure from falling crude prices, are increasingly tweaking and mixing fracking technologies as they scramble to squeeze more out of wells and eke out profits after rounds of cost-cutting.
Shale oil firms need the experiments to payoff now more so than before given that oil prices have resumed their slide to trade around $49 per barrel this week from $60 a few months ago.
Quarterly earnings – and the reams of data that accompany them – throughout the next few weeks will offer Wall Street the first opportunity to assess those efforts and pick potential winners and losers.
When oil fetched $100 a barrel and profits were fatter, most companies followed a similar script. Now, many try to go their own way in a race to bring down the price level at which production remains profitable.
Noting the new trend, CapitalOne Securities said in a recent note to clients that mixing up well completion techniques could result in “a step-change in well performance.”
For example, Continental Resources Inc is blending so-called plug and perforate well completion techniques with a “sliding sleeve” approach, betting that gains in oil volumes will outstrip additional costs of using more than one technology.
Effectively, Continental divides a well into 30 or more sections, plugging off some and fracking others. For other parts of the well it uses a “sleeve,” a steel device that moves through the well and isolates small sections of a well at a time to be fracked.
The approach has lifted initial production rates as much as 50 percent compared with nearby wells where standard procedures using just one method were applied, Continental president Jack Stark told investors two months ago. Stark will address Wall Street analysts again on August 6 with an update on the new approach. The company is expected to report a 95 percent drop in quarterly profit, according to Thomson Reuters I/B/E/S.
To be sure, it will take months to fully assess the effectiveness of mixing and matching techniques across dozens of wells, though initial production rates, which get reported to state regulators, will offer a first glimpse.
Wells are fracked by injecting a slurry of water, chemicals and sand at high pressure down holes to crack rock and release hydrocarbons. The technology, known for decades, has made big strides in the past six years when shale oil companies developed horizontal drilling that made oilfields more accessible.
Whiting Petroleum Corp, North Dakota’s largest oil producer, since this spring has experimented with pumping twice as much sand into a well during fracking as usual and has found it can boost output by as much as 40 percent.
The Denver-based company, which is expected to barely eke out a profit when it reports quarterly results on Wednesday, was so encouraged by the output rise that earlier this month it increased its 2015 budget by 15 percent to $2.3 billion to finish more wells this year.
Meanwhile, Hess Corp has opted to stick with just the cheaper “sliding sleeve” technique. Data from state oil regulators show that Hess has some of the most productive wells in North Dakota.
“I want to preserve that efficacy I have with sliding sleeve,” Gerbert Schoonman, vice president in charge of Hess operations in North Dakota’s Bakken shale oil formation, told Reuters.
By contrast, Exxon Mobil subsidiary XTO Energy has chosen to continue to use “plug and perforate” in some areas and “sliding sleeve” in others, and not mix them up. Exxon is expected to report a nearly 50 percent drop in quarterly profit on Friday.
“We’re trying to see what process works best in each part of the Bakken,” Tim McIlwain, XTO’s operations chief, said in an interview.
Statoil is even looking beyond fracking designs. The Norwegian company is investigating whether artificial proppant shaped like the letter “X” could prove to be more effective at holding open cracks in shale rock than sand or ceramic balls.
The technology, which is still being tested, came from a competition for scientists Statoil held earlier this year with General Electric Co to find new styles of proppant.
“You can get more diameter out of the ‘X’ with less material than you could if it were a sphere of a sand grain,” said Gene Bock, Statoil’s North Dakota operations chief.