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Marcellus edges out Permian to become top destination for frack crews
US
THE Marcellus shale has edged out the Permian Basin as the top destination for hydraulic frac- turing crews, according to investment advisory firm Tudor, Pickering, Holt & Co. (TPH). The change illustrates how the oil price collapse is hitting liquids-rich shale production, while dry gas regions remain relatively resilient.
The Permian has been by far the leading tight oil production region in the US in recent years and more recently was second only to the Appa- lachian Basin – which contains the Marcellus and Utica plays – in terms of shale gas. And while the Permian continues to account for the larg- est share of active rigs in the country, the same can no longer be said for completion crews. The Marcellus’ lead is very narrow, but appears set to grow given the rapid pace at which Permian activity has been scaled back.
TPH said that 31% of the active frack crews in the field were now in the Marcellus, compared with 30% in the Permian. Meanwhile, the gas- rich Haynesville shale and the liquids-rich Eagle Ford play now account for 14% each of the active frack crews, TPH added.
According to the firm, out of 450 frack fleets available across the US and Canada, only 70 are currently deployed. As well as curtailing drilling outright, many shale players will likely be hold- ing off on well completions, and hoping to bring new production online at a time when it will be more profitable. Indeed, the US Energy Informa- tion Administration (EIA) said in its latest Drill- ing Productivity Report that Permian drilled but uncompleted (DUC) wells had risen by 28 in April to 3,464, compared with an increase of eight in March. However, the relatively mod- est increase illustrates that more operators are choosing not to drill at all – for comparison, a year ago the EIA found that DUC counts had increased by 47 in April 2019.
Others have painted an even bleaker picture than TPH, suggesting there could be fewer than 50 frack crews in operation currently. However, TPH’s managing director, George O’Leary, said inaresearchnotethatbothfigureswere“putrid”, adding that either way, his firm does not expect a recovery until the fourth quarter of this year or the first quarter of 2021.
“This is setting up to be the sharpest quar- ter-over-quarter active horizontal frack crew
In the week up
to May 22, the active US oil and gas rig count fell to a new all-time low for the third consecutive week.
count decline in memory,” O’Leary wrote. “Put- ting lipstick on a pig, it was a teeny-tiny bit com- forting to see the month-over-month decline rate slow in May versus April, but it’s certainly quite bloody out there.”
The drop in both drilling and completions is set to continue, with the US oil rig count – which typically lags oil price trends – not thought to have bottomed out yet. In the week up to May 22, the active US oil and gas rig count fell to a new all-time low for the third consecutive week, dropping from 258 to 237. Oil-focused rigs alone accounted for the drop, while the gas rig count remained unchanged on the previous week at 79, illustrating the comparative resilience of dry gas drilling.
In the Permian, the rig count fell from 175 to 162, while in the Marcellus, it stayed unchanged at 30. The Permian accounts for the bulk of the rig decline since mid-March, when its rig count stoodat418.
US Secretary of Energy Dan Brouillette said last week that over 2.2mn bpd of US production had been shut in as of May 21, with this figure expected to rise further before demand picks up again, allowing output to be ramped back up.™
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w w w . N E W S B A S E . c o m Week 21 28•May•2020