Changes to well design could create some very big changes with in the oil and gas industry. We continues to see operators shorten frac lengths and focus on fracturing closer to the well bore. This has produced impressive results, and looks to be the future of US unconventional completions.  Operators will continue to improve completion techniques. The increased fracs will also make larger voids in the rock requiring more proppant. This technique not only produces more resource but allows for more locations per section as wells can be drilled closer to one another. The emergence of Mega-Fracs also has increase demand as a percentage for sand. The changes in this design has excluded the use of some ceramics as pressures do not require the most durable proppants. This could be an issue for oil prices, as operators are seeing significant increases in production with cost increases of just a million per location on average. 

(Source: Pioneer)

Pioneer (PXD) shows the metamorphosis of its well design. The fractures become more numerous, shorter and wider. This change results in a better job of breaking up the source rock.  It also requires more sand and fluids. It now is using 1,700 lbs/ft of proppant or 17,000,000 lbs for a 2 mile lateral.  The trick is the use of tighter frac cluster spacing, and shorter stages. This better focuses the pressure created on the rock and releases more resource. It is important to note, induced fractures or those done by the operator produce more resource than the natural fracturing interconnected with the well. InItial thoughs were for fracs deep into the interval creating better returns. This changed after EOG Resources (EOG) was able to show its design was superior.  Other operators are also increasing the use of proppant (sand). 

(Source: Pioneer)

The well results have been phenomenal.  Its 9,500 foot laterals have been 78% oil and EURs have averaged 1,600 MBoe.

Continental Resources (CLR) has reported increasing proppant volumes by 50% in the SCOOP Woodford Condensate.

(Source: Continental)

Areas like the SCOOP/STACK and Permian may be seeing the greatest increases, as this style seems meant for this type of play. All plays are seeing increases, but some more as one would expect. Matador (MTDR) adopted its initial well design working with EOG in the Eagle Ford. It has used this approach in Delaware Basin wells. 

(Source: Matador)

Its new design uses 2100 to 3000 lbs/ft. This means a 10,000 foot lateral would require 30,000,000 lbs of proppant. This design continues to expand and is a perfect fit in the Permian.

(Source: Matador)

Matador’s Wolfcamp A-XY locations have also responded well to Mega-Fracs. The decline rate long term has outperformed most company curves.  These wells perform even better long term than in the short term which is irregular. This has much to do with US oil production holding up better in the long term. This has been bad for the glut, but an improvement with respect to EURs and well economics in Texas.

(Source: Devon)

Devon (DVN) is also moving ahead with enhanced completions. It is using around 2,000 lbs/ft and this has helped it to industry leading results. It recently completed the Hobson row in the Woodford core which used 2, 600 lbs/ft. It is using 70 stage horizontals with frac clusters spread out every 20 feet. 

(Source: Devon)

Frac sand continues to take market share.  This is important as overall proppant usage has decreased with the downturn.  Much of this is due to less wells completed per year, but this increased volumes are making up for this.

(Source: Hi Crush)

Hi Crush (HCLP) has shown frac sand market share to have increased 71% since 2009. Ceramics and resin coated sand have not faired as well.  Mega-Fracs are sand intensive and benefit those producers. 

In summary, the frac sand market continues to have upside based on the new Mega-Frac designs. Most operators are moving to just these types of designs, and it is possible be would see significant improvements in the years to come. We need to keep in mind that this is a newer industry. It will continue to grow production per foot while decreasing costs. It is possible well service will be able to raise prices next year, but things look good going into year end. The benefactors include US Silica (SLCA), Hi Crush, Fairmount (FMSA) and Emerge (EMES). It could be counter productive for Carbo Ceramics (CRR) as its need is decreased. Although there has been an incredible move in the sector, there should be more to come.