DUG Permian Basin Conference Permian Growth Straining the Supply Chain Fort Worth, Texas May 22, 2014 Christopher Robart crobartpacwestcp.com +1 202 352 7805 (mobile) +1 713 929 3272 (direct) PacWest Consulting Partners 920 Memorial…
DUG PERMIAN 2014 DRAFT Terms & Conditions of Use All materials included in this presentation were prepared by PacWest Consulting Partners, LLC. The original presentation is not to be redistributed to third parties in any manner…
DUG PERMIAN 2014 DRAFT Contents 1. About PacWest & Methodology 2. D&C Activity Trends 3. Labor 4. Hydraulic Fracturing 5. Water 6. Proppant 7. Summary Client Confidential PacWest 2013 All rights reserved 3
DUG PERMIAN 2014 DRAFT PacWest is a boutique strategy consultancy and market intel firm specializing in energy, industrial, resources; strength in the oilfield PacWest Overview & Capabilities Consulting & Advisory Market Intelligence…
DUG PERMIAN 2014 DRAFT PacWest currently offers a range of oilfield market intelligence products to support subscriber decision-making Market Intelligence Offerings Product Description Detailed analysis and forecast of global frac…
DUG PERMIAN 2014 DRAFT Contents 1. About PacWest & Methodology 2. D&C Activity Trends 3. Labor 4. Hydraulic Fracturing 5. Water 6. Proppant 7. Summary Client Confidential PacWest 2013 All rights reserved 6
DUG PERMIAN 2014 DRAFT After sharp growth in early 2014, we expect HZ rig count to increase moderately through 2015 before stabilizing Permian Rig Count Forecast Rigs 600 HZ The Permian Basin has the largest VT/DR concentration of…
DUG PERMIAN 2014 DRAFT D&C activity expected to grow quickly, however, the supply chain will likely struggle to keep up with demand Permian D&C Activity Summary Wells Fraced, Frac Stages, Wells Spud Comments 10 Forecast 120 Despite…
DUG PERMIAN 2014 DRAFT Contents 1. About PacWest & Methodology 2. D&C Activity Trends 3. Labor 4. Hydraulic Fracturing 5. Water 6. Proppant 7. Summary Client Confidential PacWest 2013 All rights reserved 9
DUG PERMIAN 2014 DRAFT Midland county median wages have increases by 26% since 2002, while nationally wages have remained stagnant in the US Annual Media Salary across the Permian and US Annual Median Salary (in 2013 000 USD)…
DUG PERMIAN 2014 DRAFT Contents 1. About PacWest & Methodology 2. D&C Activity Trends 3. Labor 4. Hydraulic Fracturing 5. Water 6. Proppant 7. Summary Client Confidential PacWest 2013 All rights reserved 11
DUG PERMIAN 2014 DRAFT We forecast strong increases in Permian frac demand through 2016 due to increased unconventional D&C activity Permian: Supply & Demand Outlook Rig Count Demand Outlook Forecast 600 HZ VT/DR The Permian Basin…
DUG PERMIAN 2014 DRAFT Permian pricing is increasing moderately due to rapidly increasing demand and capacity utilization Permian: Utilization & Price Outlook (New Bid / Spot Market) Utilization & Price Index (New Bid / Spot) Market…
DUG PERMIAN 2014 DRAFT Contents 1. About PacWest & Methodology 2. D&C Activity Trends 3. Labor 4. Hydraulic Fracturing 5. Water 6. Proppant 7. Summary Client Confidential PacWest 2013 All rights reserved 14
DUG PERMIAN 2014 DRAFT D&C water requirements forecasted to grow to 464 MM by 2016; flowback and produced water to reach 6.2 billion bbl by 2016 Permian Required & Produced Water (2011-2016) D&C Water Requirements (MM bbl) Comments…
DUG PERMIAN 2014 DRAFT Filtration, electromechanical, and chemical additive are the most common water treatment methods deployed in the Permian Permian Basin Technology Deployment: Water Treatment Services Treatment Technologies…
DUG PERMIAN 2014 DRAFT Pricing for most water management services is still under pressure Permian Market Dynamics Segment Pricing Price Trend Market Trends Groundwater is the main supply of source water; increasingly, E&Ps are 0.3 -…
DUG PERMIAN 2014 DRAFT Disposal well capacity utilization for key growth counties is increasing, as demonstrated by Glasscock, Reagan, and Upton counties Disposal Well Capacity Utilization Analysis Rig count Permian Basin County Map…
DUG PERMIAN 2014 DRAFT Disposal well utilization increased sharply in Glasscock county beginning in 2007 Disposal Well Capacity Utilization: Glasscock County Permitted & Recorded Pressure (avg. kpsi) Comments 70 Capacity utilization…
DUG PERMIAN 2014 DRAFT Capacity utilization has been increasing steadily in Reagan county, with a spike in late 2013 Disposal Well Capacity Utilization: Reagan County Permitted & Recorded Pressure (avg. kpsi) Comments 110 Disposal…
DUG PERMIAN 2014 DRAFT Capacity utilization has increased steadily in Upton county since 2005 Disposal Well Capacity Utilization: Upton County Permitted & Recorded Pressure (avg. kpsi) Comments 70 Disposal well demand and supply…
DUG PERMIAN 2014 DRAFT The area of higher disposal well utilization in Upton county has increased Upton County Disposal Well Capacity Utilization (% Permitted Pressure) 2009 Capacity Utilization Heat Map 2013 Capacity Utilization Heat…
DUG PERMIAN 2014 DRAFT Contents 1. About PacWest & Methodology 2. D&C Activity Trends 3. Labor 4. Hydraulic Fracturing 5. Water 6. Proppant 7. Summary Client Confidential PacWest 2013 All rights reserved 23
DUG PERMIAN 2014 DRAFT The Permian proppant market is forecast to grow at 18% per year through 2016, driven by robust growth across all proppant types Permian Proppant Demand Proppant Wells Consumption Fraced, (billion by Proppant…
DUG PERMIAN 2014 DRAFT Sand supply/demand both forecast to increase; tightening conditions have led to price escalation Frac Sand Market Trends Demand vs. Supply (billion pounds) Comments 140 Frac sand supply growth 120 outpaced…
DUG PERMIAN 2014 DRAFT Pricing is expected to increase for both coarse and fine grades; however, market dynamics differ Capacity Utilization & Pricing Trends: Coarse vs. Fine Grade Sand Coarse Grades: Utilization vs. Minegate Price*…
DUG PERMIAN 2014 DRAFT Regional pricing for sand is a function of transportation costs and sand grade Regional Wholesale Sand Prices INITIAL ESTIMATES Wholesale Sand Price* Range (/T) Comments 200 Wholesale pricing is highest in the…
DUG PERMIAN 2014 DRAFT 20/40 sand is priced at a significant premium to other grades, while 100 mesh is at a significant discount, relative to other plays Regional Frac Sand Pricing: Permian (14Q1) INITIAL ESTIMATES Wholesale Price…
DUG PERMIAN 2014 DRAFT Contents 1. About PacWest & Methodology 2. D&C Activity Trends 3. Labor 4. Hydraulic Fracturing 5. Water 6. Proppant 7. Summary Client Confidential PacWest 2013 All rights reserved 29
DUG PERMIAN 2014 DRAFT Rapid growth in the Permian is expected to strain the supply chain, resulting in cost escalation Summary D&C activity in the Permian is robust, with strong market growth expected through 2016 Forecasts for…
DUG PERMIAN 2014 DRAFT 3 Our Approach Q&A Questions & Answers Client Confidential PacWest 2013 All rights reserved 31
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