U.S. frackers are bringing back equipment even as oil prices languish around $40 per barrel in a bid to boost production and tap into a backlog of drilled wells left uncompleted (DUCs) when oil prices crashed earlier this year.
The number of active hydraulic fracturing fleets has climbed by nearly 50% since mid-September to 127, according to data from consultancy Primary Vision, outpacing a roughly 17% jump in the number of active drilling rigs over that same period of time. That count stands at 296.
U.S. oil prices were trading around $38.53 per barrel on Nov. 5, below profitable levels in some U.S. producing basins. Still, hydraulic fracturing equipment is headed back to the field, as oil companies are trying to deal with the swift rate at which shale well production falls.
U.S. shale production is expected to fall to 7.7 MMbbl/d in November, down from 9.2 MMbbl/d in February, before prices crashed, according to the U.S. Energy Information Administration.
Fracking was the first thing to get shut down when oil prices collapsed because it’s the most expensive part of drilling and completing a well, said Andy Hendricks, CEO of driller Patterson-UTI Energy. When prices rose, operators brought back frack crews to complete wells that were drilled but not yet completed, accounting for a big bump in frack activity.
The companies that specialize in well completions, like ProPetro Holding Corp. and Liberty Oilfield Services, have said they are adding back workers.
“Oil-focused operators and basins are trying to manage decline curves,” Primary Vision CEO Matt Johnson said.
The U.S. added as many as 1,200 DUCs in May, according to analysis from consultancy Enverus, but began completing wells at a faster rate than rigs could drill them starting around July. In October, operators were burning through DUCs at a rate of roughly 200 a month, Enverus said.
That pace could slow, Hendricks warned.
“I don’t expect big increases in frack activity from where we are. We just don’t have the inventory,” he said referencing DUCs.
Apache Corp. suspended drilling and fracking in the Permian Basin in April but said on Nov. 5 during a call with analysts that it has hired two crews to complete a backlog of about 45 wells.
“We are now seeing very compelling service costs in the Permian Basin,” Apache CEO John Christmann said.
Patterson-UTI, which has a larger contract drilling portfolio than hydraulic fracturing, bottomed out at four hydraulic fracturing fleets in June but will average six fleets this quarter. Rival ProPetro is anticipated to average 9.5 fleets in the fourth quarter versus four fleets in the second quarter of this year, according to analysts at investment firm Evercore ISI.
U.S. natural gas futures rose on Dec. 31 and were on track for their best year since 2016, helped by forecasts for slightly colder weather than previously expected and record LNG exports.
Maintenance work and fog cut shipments to a yearly low.
Cameron LNG has sent out eight cargoes since May, reaching a level of three cargoes a month in August. The last cargo left on Sept. 7.