Joel Schneyer, managing director at Capstone Headwaters, said that Rystad Energy is reporting that the Eagle Ford may provide hope for Northern White Sand producers because inferior quality in-basin sand may not be adopted
On July 17, Ryan Carbrey and Ryan Hassler of Rystad Energy hosted a U.S. Land Oilfield Service Update. During the webinar, they discussed drilling and frac efficiency improvements, the Eagle Ford providing hope for northern white sand producers, trends and bottlenecks in oilfield water and look forward to H2 activity. Their comments on the adoption rates of in-basin sand were most interesting and worth repeating for those that did not have the opportunity to participate:
“An interesting and kind of practical comparison to make is looking at the Permian basin, where we have seen quite high adoption rates1 already throughout in the Permian-Midland and Permian-Delaware, specifically the Permian-Midland which had prolific rates of adoption … The map that we are looking at here is average treatment pressure distribution for horizontal wells in 2018 … As we can see about 95% of the activity in the Permian-Midland is actually occurring at average treatment pressures below 8,000 psi. That tells us that higher quality Northern White sand with higher crush strength and greater conductivity may not be necessary with the lower pressures here in the Midland, and that can help explain some of the prolific adoption rates that we are seeing here [of in-basin sand in the Permian-Midland].
“And if we look at the Delaware, little bit different story is being told. About 60% of the activity in the Permian-Delaware is actually occurring at average treatment pressures above 8,000 psi. So then the analysis becomes whether or not in-basin sand is of high enough quality to continue producing at levels that Northern White sand are. So the quality of the in-basin sand in the Permian is actually some of the greatest in the country, has some of the best qualities as far as in-basin sands go … looking at the production profiles in the Permian-Delaware of Northern White Sand versus the in-basin, so far, we have not seen too much degradation in the production, but we have also needed a little bit more time and data to analyze this completely. As data keeps trickling in, Rystad will keep observing both Permian-Midland and Delaware and continue updating the model.
“But then the interesting thing to look into for the Eagle Ford is the treatment pressure distribution. Very similar to that Delaware … 60% of activity occurring at average treatment pressures above 8,000 psi just like in the Delaware. But the problem for Eagle Ford is that the in-basin sand is of much lower quality than even the Permian, meaning that is obviously much worse than Northern White sand. So the analysis then becomes kind of a comparison, if we are seeing slight degradation already in the Delaware then you can kind of make a logical assumption that the Eagle Ford will likely see even maybe more of a slide. So again, as more data becomes available for us here at Rystad will continue monitoring it. So it’s something we are keeping a close eye on. We have heard already reports of a few larger operators in the Eagle Ford switching back to Northern White sand … So again, the Eagle Ford provides a large market for Northern White Sand producers. If we do see that adoption rate get up to 40% that might cause a little bit more trouble, so it’s something that we will keeping a close eye on and updating as more data comes in.
“Noteworthy to see independent energy consulting services and business intelligence data firm Rystad Energy raise the caution flag on in-basin sand adoption rates in the Eagle Ford, suggesting a link between sand proppant quality and well performance. Although more expensive than in-basin substitutes, my belief is that Northern White sand has an undervalued competitive advantage (i.e. higher conductivity) which should result in greater EUR’s and in some circumstances, higher NPV’s. Surely a topic that is even more relevant today, with activist shale investors pressing incumbent managements to search for business execution strategies that result in greater shareholder returns (i.e. EQT is just the first palace uprising, expect more to follow.”
You can read Schneyer’s comments here.