Baker Hughes Closes Another Texas Location

Baker Hughes Cuts Jobs
Baker Hughes Cuts Jobs

Baker Hughes pink slips are starting to add up. The latest casualties are the 54 employees who will be out of work when Baker Hughes permanently closes its office in Bryan, TX.

Since the first of the year, Baker Hughes has closed other Texas locations including operations in Mineral Wells (110 employees), Kilgore (58) and Alice (51).

Related: Energy Giants Announce Layoffs

Baker Hughes representatives continue to say that job cuts are part of a company wide workforce reduction of an estimated 7000 workers in order to minimize costs during this downturn in oil prices. Also at play is Baker Hughes’ upcoming merger with Halliburton, where it is likely that both companies will combine operations and eliminate redundancies.

Related: Halliburton to Merge With Baker Hughes

The Houston Chronicle reported in December that the combined company expects to make $2 billion in cuts, with most of the job loses coming from operations.

We don’t want to be insensitive to the uncertainty and acknowledge that the fact that anytime you have institutions of this size coming together there will be some adjustments, but I think it would be premature to speculate.
— Baker Hughes CEO, Martin Craighead

Baker Hughes Reports Record Eagle Ford Well Spuds in Q4

Eagle Ford Well Spuds Q4 2013
Eagle Ford Well Spuds Q4 2013

Baker Hughes reported a record number of Eagle Ford well starts in the fourth quarter of 2014. The company's quarterly report shows ~1,171 wells were started over the three month period.

Rigs also drilled 0.5 wells more in the quarter than they did in the third quarter of 2013. That's an improvement of 40% or 1.5 more wells per quarter per rig than the industry was capable of in early 2012.

We consider the Baker Hughes well start estimate conservative since the company only considers a 14 county area in its Eagle Ford statistics. The numbers reported ignore areas like Brazos County where Eagle Ford activity is increasing.

Also Read -Eagle Ford Record Set for Well Spuds in Q3 (now a broken record)

By adding in the non-core Eagle Ford counties, well spuds easily eclipsed 1,200 wells in the fourth quarter.

Even though we reported this in the third quarter, it's also the first quarter in which well spuds eclipsed 1,100 in the 14-county area. The Baker Hughes reported well spuds were revised down in the third quarter from 1,131 to 1,096.

Read more:Did You Know Drilling Starts On Over 1,000 Eagle Ford Wells Each Quarter?

Watch for this record to be broken throughout 2014 if oil prices hold in the $90/bbl or higher range.

Eagle Ford Record Set for Well Spuds in Q3

Eagle Ford Well Spuds Q3 2013
Eagle Ford Well Spuds Q3 2013

Baker Hughes released its third quarter estimates for well spuds and the Eagle Ford eclipsed 1,100 wells in a single quarter for the first time. The play accounted for 1,133 or more than 10% of the 9,175 wells spud in the U.S. during the quarter.

Baker Hughes tracks the 14 core counties when evaluating the play, so actual numbers are higher. The oilfield service company tallied 233 rigs the 14 county area during the quarter compared to ~270 in the 30 county area we observed.

Did you know drilling starts on over 1,000 Eagle Ford wells per quarter?

The number of well spuds was up 4% from 1,089 in the second quarter to 1,133 in the third quarter. The average rig in the Eagle Ford drilled 4.86 wells during the third quarter or averaged a little less than 19 days drilling and moving from well to well.

The Eagle Ford and the Permian together accounted for more than one-third of all well spuds in the quarter.

Did You Know Drilling Starts On Over 1,000 Eagle Ford Wells Per Quarter?

Eagle Ford Well Count Q2 2013
Eagle Ford Well Count Q2 2013

Did you know that drilling rigs spud more than 1,000 Eagle Ford wells per quarter in South Texas? To top it off, that is a conservative estimate.

Baker Hughes is known for publishing weekly rig count estimates and the company is now publishing well count estimates in many of the major plays across the U.S.

The third quarter of 2012 was the first quarter that well starts in the Eagle Ford eclipsed 1,000. The number of wells spud fell below 1,000 in the fourth quarter and rose back above that level in both the first and second quarter of 2013.

Since the beginning of 2012, rigs have spud approximately:

  • Q1 2012 - 876 wells
  • Q2 2012 - 932 wells
  • Q3 2012 - 1,024 wells
  • Q4 2012 - 974 wells
  • Q1 2013 - 1,044 wells
  • Q2 2013 - 1,050 wells

We consider these conservative estimates because Baker Hughes only considers a 14 county area in its Eagle Ford statistics. That leaves out areas like Brazos County, where Halcon is ramping up development of the Eagle Ford. Considering all data points, it's likely well spuds surpassed 1,100 in the second quarter of 2013.

Eagle Ford Drilling Crews Are Getting More Efficient

It's no secret that drilling is speeding up as operators and crews gain experience in the Eagle Ford. When the Baker data begins in the first quarter of 2012, the average rig in the play was drilling 3.74 wells. The average rig drilled 4.56 wells in the second quarter of 2013. That's a 22% improvement or, more impressively, almost one more well per rig per quarter. I'd say that's pretty good improvement in just a little over a year.

With almost 250 of the 270+ rigs in the region targeting the Eagle Ford, it looks like we'll see 1,000 wells drilled per quarter for the foreseeable future.

The Permian Basin of West Texas is the only basin or region with more activity than the Eagle Ford. Operators target multiple plays across in the Permian and the area has almost twice as many rigs running.

Eagle Ford Well Completed With LNG Powered Frack Pumps

Onshore LNG Regas and Tanker
Onshore LNG Regas and Tanker

LNG powered frack pumps were used to complete an Eagle Ford well in late 2012. We sat down with Ferus' LNG rep Jed Tallman to learn more. This was the first time LNG has ever been used to fuel pumps fracking a well. Field gas has been used by Schlumberger in the Horn River Basin of Canada, but LNG has never been used before.

Ferus is an oilfield service company that supplies cryogenic liquids as part of its offering. The company worked with Baker Hughes to test natural gas conversion technology and yard tested 10 Cummins QSK50 powered pumps. After a successful test, the companies took the pumps into the field to complete an Eagle Ford well south of Pearsall.

Diesel fuel was used as the spark for combustion and LNG was regassed and brought in through the air intake.

Mr. Tallman stated, "This particular technology can achieve diesel substitution rates of 40-65%. An average of 50% substitution is expected.""

Only 6 LNG powered pumps were used on this particular job, but ten will be tested soon. A real determination of savings will be made when the LNG pumps are being fully utilized.

In simple economic terms, vaporized LNG is 20-40% cheaper than diesel fuel. Ifyou can substitute half that cost, you can save 10-20% on fuel costs alone. Build pumps fully powered by LNG and you might save 40%. Consider the average Eagle Ford well can consume as much as 25,000 gallons of diesel and the economics become attractive.

LNG Provides Environmental Benefits

There is also an environmental benefit to using LNG over diesel. Emissions for natural gas vs. diesel can drop as much as 30% for CO2, 75% drop for NOx, 90% drop in particulates, and a 99% drop is SOx emissions.

More LNG Powered Frack Jobs Are Coming

Ferus is building one 50,000 gallon per day LNG plant in Western Canada and has plans for three more, each of which will have capacity for 87,000 to 100,000 gallons per day, consuming 8.5 mmbtu’s/day.

Ferus is building one 50,000 gallon per day LNG plant in Western Canada and has plans for three more, each of which will have capacity for 87,000 to 100,000 gallons per day, consuming 8.5 mmbtu’s/day. Ferus is currently looking at areas of high demand and expects the Eagle Ford to top that list. The company committed to develop the plants a couple of years ago, so everything is in place to have a plant up and running in as little as 18 months.

This won't be the last time you hear about LNG being used in frack pumps. Apache will complete a well with 12 LNG powered frack pumps in January of 2013. The effort will be in partnership with Schlumberger and Halliburton. Apache expects fuel cost to fall from a little more than $120,000 to less than $75,000 when utilizing a duel fuel approach similar to that implemented by Baker Hughes and Ferus.

The real hope is to one day fuel the pumps with gas source directly from the field. If field gas were to replace diesel, the industry could save more than $1.5 billion per year. Sounds to me like Ferus should get to work on a new plant in South Texas.