First Quarter Results Boost 2014 Outlook for Unconventional Oil & Gas

By Sarah Groen
Vice President, Strategic Marketing - MicroSeismic, Inc.

When thinking about industry outlook, it’s important to take a step back and think about how far the unconventional oil and gas market has come in just the past two years. Over the last few quarters the word of the day has been “efficiency.” This laser focus on efficiency has become a driver in everything from pressure pumping capacity, to completions techniques, to the way companies are reporting results to investors. There’s nary an oil and gas operator that doesn’t have the quintessential “how much cost we’ve driven out of our drilling and completions operations since 2012” slide in its investor presentation. This drive towards efficiencies seems to be propelling our market forward.

After a mixed bag of results in 2013, the first quarter of 2014 seems to be a turning point. In Halliburton’s Q1 conference call, CEO Dave Lessar stated, “I'm starting to feel the turn. I'm starting to feel the momentum swing. Not only that, I'm starting to see it happen. I’m more excited about North America now than I have been since late 2011.”

At MicroSeismic, we’re beginning to see the turn as well. Projected 2014 rig count is only expected to be up about 2%, however, because of the drive towards efficiencies (more wells per pad, more wells spud per rig, etc.), we believe number of wells frac’d, and number of stages frac’d are better indicators of the market outlook.

 In 2014, we expect number of stages frac’d in the US to be up about 18% and the number of wells frac’d to be up 10%. Increases in number of frac’d stages is growing at a faster rate than number of wells frac’d due to increasingly longer laterals and a trend towards shortened frac stages/spacing.

Efficiency is driving drilling days down, increasing the number of wells drilled per pad, increasing 24 hour operations, and driving new techniques such as zipper frac’ing. The ability of the operators to do more with less helps them to drive faster on the same capital budget. For the service companies tied to the well rather than the rig count, this should be good news for at least the next two years.

As incremental gains in terms of efficiencies become harder and harder to find, operators will focus on optimizing production. With MicroSeismic’s Completions Evaluation Services, operators can begin down that path now by optimizing well spacing, comparing completion techniques, and getting early estimates of production.