- Engineered proppant is slated for a marketshare gain in 2018.
- Cost remains the main obstacle for engineered proppant.
The instruction for customers in the old West Texas print shop was direct: good, fast, cheap. Pick two. That guideline applies to proppant selection in multistage fracturing. The majority of E&P companies are choosing “cheap” as the first option in a cost-conscious environment.
That is most evident in the gradual decline in marketshare for engineered proppants as slickwater plug-and-perf gains share in hydraulic fracturing methodology. Engineered proppants accounted for less than 16% of volume in the proppant market in 2017, according to an E&P sampling of FracFocus data.
In other words, few E&P management teams are letting the best outcome become the enemy of a good outcome. If the board is happy with the CEO, who is happy with the production managers, a “good” outcome is “good enough” in the oil patch. The question is whether improvement in engineered proppant, such as proprietary resin-coated sand, specialized fluids and rising commodity prices, will impact that “good enough” approach and increase share for engineered solutions in a global proppant market that is projected to grow financially into the early 2020s at a 7% annual compound growth rate.
Fairmount Santrol Co., Emerge Energy Services LP and U.S. Silica Holdings Inc. are among proppant providers who are moving proprietary engineered proppant into commercialization in 2018.
Industry emphasis is on advanced proppants that are buoyant enough to overcome duning, or settling in the wellbore, to take advantage of slickwater transportation dynamics in longer laterals. Secondly, interest is rising in a mixed proppant cocktail that ranges from channeling as an objective to customization for different sized fracture networks in the same stage.
Variations such as curable resin-coated proppant are used as a tail-in to keep proppant embedded during flowback operations. If an E&P company spends $3 million pumping a trainload of sand in the ground, the company doesn’t want any of that sand back.
By region, engineered proppant is most common by volume in Appalachia, followed by the Bakken Shale, the latter of which finds the highest concentration of ceramics. Ceramics are found in HP/HT deeper plays in the Anadarko Basin and in the Gulf Coast. Appalachia and the Bakken combined represented 68% of volume for engineered proppant in the 2017 FracFocus sample.
Proppant vendors and manufacturers represented 48% of total reported volume in engineered proppant provision led by Fairmount Santrol Co. and CARBO Ceramics Inc. Well stimulation providers accounted for 34% by volume in engineered proppant provision.
There is nuance. By class, privately held E&P companies represented 60% of total count in engineered proppant use. Privately held firms using engineered proppant were most common in the Ark-La-Tex, Anadarko Basin and Delaware Basin with publicly held companies representing greater numbers in the Bakken and in Appalachia. Also, if an E&P company used engineered proppants in one play, it was likely to use engineered proppant in other geographic areas.
Expect the engineered proppant market to gain share in 2018—how much is hard to figure. Choosing “good” characterizes privately held consumers of engineered proppant, which suggests interest in boosting net present value to support eventual IPOs or an acreage sale. Choosing “good” also characterizes publicly held E&P companies seeking the most value out of reserves. Choosing “cheap and fast” characterizes everyone else.
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