Earnings Season Recap: E&Ps Prepare for 10%+ Cost Increases

Earnings Season Recap: E&Ps Prepare for 10%+ Cost Increases

Key Themes from Last Week’s Earnings Calls

  • E&P capital remains unchanged going into the second quarter
  • Frac crews are sparse as many pressure pumpers continue to reactivate fleets
  • Drillers see increased day rates to around $20K per day as operators continue increased drilling programs
  • Frac sand prices are increasing as sand shortages continue
  • Sand companies looking to increase supply with greenfield and brownfield expansion

The Details

  • Range Resources (NYSE: RRC) drilled 3 laterals over 15,000’ and seven over 10,000’ in the Marcellus during the first quarter. About one-third of all wells in 2017 will be on existing pads and as much as half in 2018

 

  • QEP Resources (NYSE: QEP) doubles production in the Haynesville in 9 months with refrac program – plans for a total of 20 to 24 this year
  • Patterson-UTI (NASDAQ: PTEN) completes merger with Seventy Seven Energy to increase Horsepower to 1.5 million and is currently utilizing 70% of its fleet.
  • Independence Contract Drilling (NYSE: ICD) has fully contracted the company’s 14 rigs and expects technology to drive oilfield innovation.
  • Hess Corporation (NYSE: HES) continues to test 60 stage completions in the Bakken and is considering moving to higher proppant loadings.
  • US Silica (NYSE: SLCA) mentioned that there could be an additional 10 to 15 million tons of brownfield capacity added within the next 12 to 18 months and there is as much as 20 to 25 million tons of greenfield capacity that could be added in the Permian alone.
  • Precision Drilling (NYSE: PDS) has allocated $54 million of the company’s $119 million capital budget toward upgrades of about 35 rigs. This year alone the company has upgraded 11 rigs in North America.
  • Cabot Oil and Gas (NYSE: COG) foresees a 5% increase in the Marcellus and a 10% increase in the Eagle Ford by the end of 2017 – well costs are expected to increase.
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