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Forget Fracking. Choking and Lifting are Latest Efforts to Stem U.S. Shale Bust

News Article Sponsored by CoilChem

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(Reuters) – Something is awry in the beleaguered U.S. shale patch: older wells, which normally gush oil or natural gas in their first few months before rapidly depleting, are not petering out as quickly as they should.

When oil prices began falling a year and a half ago in the deepest rout in a generation, many analysts expected U.S. crude production, especially from fracking in the new shale plays that contributed to a global supply glut, to follow quickly.

Producers, such as Continental Resources Inc and Whiting Petroleum Corp , have slashed spending on almost everything, in some cases even leaving drilled wells unfinished to conserve cash and wait for a sustained turnaround in prices.

With oilfield activity suddenly contracting, production from a dwindling number of freshly fracked wells would be unable to compensate for the rapid depletion of older wells. Yet that long-anticipated turning point has only just begun to emerge – partly because producers had a couple more tricks in store.

Some drillers are spending a little bit more on measures that are subtly flattening the so-called “production curve” of shale wells, either by limiting the initial surge in output or by squeezing a few additional barrels out of older wells, according to industry executives and analysts.

The measures offer differing benefits.

Choking output at newly fracked wells curtails immediate supply and revenue in hopes that prices will be stronger later, whereas maximizing output at old wells with things like “artificial lift” is a relatively cheap way to increase volume and immediate revenues.

Baker Hughes Inc, the third-largest services company in the U.S. shale patch, cited its artificial lift business as the “one notable exception” to a sector-wide slump in its latest quarter, growing by 4 percent even as other shale-related revenues fell 10 percent.

“Companies still want to grow production, they want to generate cash,” said Wade Welborn, vice president of artificial lift at Baker Hughes. His business offers “a means to increase that cash flow.”

For oil markets, they amount to the same thing: the long-anticipated fall-off in U.S. shale oil output is still proving slower and more tempered than anticipated, impeding the process of correcting the global glut that has walloped prices.

Production optimization is going to be the next phase of the shale revolution,” said Andrew Slaughter, director for the Deloitte Center for Energy Solutions. “The low price environment will give companies and operators a chance to take stock of the techniques that work.”


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