DENVER (Reuters) – U.S. frackers are bringing back equipment even as oil prices languish around $40 a barrel in a bid to boost production and tap into a backlog of drilled wells left uncompleted (DUCs) when oil prices crashed earlier this year.
The number of active hydraulic fracturing fleets has climbed by nearly 50% since mid-September to 127, according to data from consultancy Primary Vision, outpacing a roughly 17% jump in the number of active drilling rigs over that same period of time. That count stands at 296.
U.S. oil prices were trading around $38.53 a barrel on Thursday CLc1, below profitable levels in some U.S. producing basins. Still, hydraulic fracturing equipment is headed back to the field, as oil companies are trying to deal with the swift rate at which shale well production falls.
U.S. shale production is expected to fall to 7.7 million barrels per day in November, down from 9.2 million bpd in February, before prices crashed, according to the U.S. Energy Information Administration.
Fracking was the first thing to get shut down when oil prices collapsed because it’s the most expensive part of drilling and completing a well, said Andy Hendricks, chief executive officer of driller Patterson-UTI Energy PTEN.O. When prices rose, operators brought back frack crews to complete wells that were drilled but not yet completed, accounting for a big bump in frack activity.
“Oil focused operators and basins are trying to manage decline curves,” said Matt Johnson, chief executive of Primary Vision.
The U.S. added as many as 1,200 DUCs in May, according to analysis from consultancy Enverus, but began completing wells at a faster rate than rigs could drill them starting around July. In October, operators were burning through DUCs at a rate of roughly 200 a month, Enverus said.
That pace could slow, Hendricks warned.
“I don’t expect big increases in frack activity from where we are. We just don’t have the inventory,” he said referencing drilled-but-uncompleted wells.
Apache Corp APA.O suspended drilling and fracking in the Permian Basin shale field in April, but said on Thursday during a call with analysts that it has hired two crews to complete a backlog of about 45 wells.
“We are now seeing very compelling service costs in the Permian Basin,” said CEO John Christmann.
Patterson-UTI, which has a larger contract drilling portfolio than hydraulic fracturing, bottomed out at four hydraulic fracturing fleets in June, but will average six fleets this quarter. Rival ProPetro is anticipated to average 9.5 fleets in the fourth quarter, versus four fleets in the second quarter of this year, according to analysts at investment firm Evercore ISI.