Schlumberger's HiWay Frac Design Improves Eagle Ford Well Performance

Schlumberger HiWay Channel Fracturing

Schlumberger's (SLB) HiWay flow channel frack design has been most successful in the Eagle Ford. The company has completed a significant number of wells in the basin and has shown the design increases production while utilizing less proppant.

The production response has not been as positive in other plays, but the company generally sees flat to higher production with lower well costs. The advantage where production isn't higher is the cost savings realized by using 40% less sand/proppant.

Paal Kibsgaard, CEO, stated "We believe its (HiWay Frac's) applicable in every basin"

Also read: Forest - Schlumberger JV Allows Forest to Drill More With Less

Record North American Revenue

Schlumberger reported strong results in the third quarter. The company's North American revenue was up 7% and set an all time high at $3.6 billion.

The company did see downward pricing pressure, but less than it has experienced in prior quarters.

Schlumberger also discussed ongoing tests to increase the utilization of perforation clusters in completions. Prior tests have shown that 30-70% of perforation clusters do not contribute to production. The company is testing a diversion technology that is employed during the completion. Watch for future announcements from Schlumberger and other oilfield service providers.

If possible, it's in everyone's best interest to increase well performance by 30-70%.

Forest Oil's Eagle Ford Production Jumps 21% in the Second Quarter

Forest - Schlumberger Eagle Ford Acreage

Forest Oil agreed to a joint venture with Schlumberger in the Eagle Ford during the second quarter and it didn't take long for the company to increase its activity in the region. Forest Oil's operated Eagle Ford production grew 59% to 4,300 boe/d and net production grew 21% to 2,300 boe/d during the second quarter.

The company completed nine Eagle Ford wells at an average initial production rate of 529 boe/d and well costs have fallen from $7 million in 2012 to $6 million in the quarter.

The first seven wells completed with Schlumberger's HiWay flow channel technique were in various stages of completion at the end of the quarter. Watch for production results from these wells in the coming weeks.

“Our Eagle Ford Shale asset took a significant step forward during the quarter.... We recently ramped up our drilling activity further by adding a fourth drilling rig to the field. We are encouraged by recent well results as we implement ongoing technological refinements and enhancements to our drilling and completion process in an effort to optimize well results and costs.”

— Patrick R. McDonald, CEO

Eagle Ford production grew even though Forest Oil spent less in the Eagle Ford. That's the benefit of having costs carried by a partner. As a result of the financial terms of the Schlumberger deal,  Forest increased activity in the play while spending fell from $131 million in the first quarter to $74 million in the second quarter.

The companies are also expanding the use of micro-seismic and have subsurface data and reservoir studies ongoing.

In the quarterly release, Forest also announced plans to sell assets in the Panhandle to further improve the company's balance sheet. Read the full press release at forestoil.com

What To Watch For In The Eagle Ford - Video

Short overview, then commentary discussing what to watch for from public companies in the Eagle Ford.

Aimee discusses Forest Oil's recent deal with Schlumberger, Atlas Pipeline's acquisition of Teak Midstream, and Conoco's drilling costs.

Forest Oil - Schlumberger Eagle Ford Development Agreement Inked

Forest - Schlumberger Eagle Ford Acreage

Forest Oil and Schlumberger have signed an Eagle Ford development agreement in Gonzales County, TX. Schlumberger will pay $90 million in the form of future drilling and completion services, as well as related development capital in order to earn a 50% interest in Forest's Eagle Ford acreage position.

Once the $90 million has been contributed, Forest and Schlumberger will participate in future drilling on a 50/50 basis. Forest expects the drilling carry will contribute to development through 2014.

“We believe that our Eagle Ford position is a valuable oil asset and being aligned and working together cooperatively with a strategic partner such as Schlumberger will greatly enhance the value of this important asset.”

— Patrick R. McDonald, Forest’s CEO

Accelerating Eagle Ford Development

Forest Oil Schlumberger Eagle Ford Development Plan

With the drilling carry, Forest plans to accelerate development by moving to four rigs running in the play by the end of the third quarter. Forest has kept 1-2 rigs running through the past several months. Forest estimates the increased pace of drilling will improve the company's asset value by ~$250 million.

Forest's share of capital expenditures are estimated at $125 million in 2013 and $220 million in 2014. Production projections are flat in 2013 at 2,800 boe/d, but increase from an estimated 3,700 boe/d to 6,500 boe/d in 2014.

Forest now estimates it will hold an aggregate of 55,000 gross (27,500 net) acres in Gonzales County. That's a larger footprint, but a smaller net holding than the 40,000 gross (40,000 net) acres that would have been held under the company's previous development plan.

Based on 80-acre spacing, Forest has a total of 688 gross (344 net) drilling locations identified. Consider an estimated ultimate recovery of 300,000 boe and unrisked resource potential comes in at 100 million boe net to each company.

The agreement affects all wells spud on or after November 28, 2012.

“We are pleased to be part of this exciting opportunity, in which Forest and Schlumberger are fully aligned and committed to the development of Forest’s Eagle Ford unconventional resources.”

— Carl Trowell, President, Schlumberger Production Management

The deal reads well for Schlumberger because the company gets to utilize its expertise, while reinvesting its margin into high quality Eagle Ford assets. The deal values Forest's Gonzales County acreage at a little less than $3,300 per acre.

Read the full announcement at forestoil.com

Lower Rig Count, But More Drilling in 2013 - Schlumberger - Halliburton

Drilling Rig Image

In the company's fourth quarter conference call, Schlumberger (SLB) executives stated they expect the active rig count will fall from the 2012 average, but there will be more wells drilled. SLB reviews its outlook for North America in its conference call each quarter. The company does expect the liquids rig count to increase in the first half of the year, but does not expect much if any recovery in natural gas drilling.

Paal Kibsgaard, CEO, stated, "But if you look at our view on 2013 for North America, we expect the U.S. land rig count to be up between about 100-150 rigs in Q1, and this is based on the feedback from our customers. Now in terms of activity for the full year, we still see U.S. land rig count slightly down versus 2012, while the well count will be slightly up."

Halliburton is also expected to echo the same sentiment in its call today. The following statement was included in the company's press release:

“In 2013, we anticipate the North America rig count will improve from fourth quarter levels but will be down slightly compared to 2012."

Other notable items from the SLB call include:

• Expects the liquids rig count to bounce up in the first quarter of 2013
• Do NOT see a significant recovery in dry-gas drilling in 2013
• Natural gas production remains strong
• Hydraulic fracturing pricing is not expected to increase in 2013

As you hear locals begin to discuss rigs moving out of your area. Remember, a lower rig count does not mean there will be fewer wells drilled. Operators get more efficient over time and need fewer rigs to develop their acreage.