SPE PB Young Professionals (YP) Event: Sep 17, 2024
SPE Permian Basin Energy Conference: Oct 22-24, 2024
Texas Tech SPE Annual Clay Shoot: Nov 1, 2024
30th Annual CO2 Conference: Dec 9-12, 2024
CHAIRMAN’S CORNER
SPE Permian Basin Sec on Members,
Tyler Yancey
Petroleum
Engineer
Chevron
SPE-PB Chairman 2024-2025
We are in full swing for the events planned in September, which will offer you great opportuni es to network, learn, share and gain value. Leading the way is the SPE Permian Basin 33rd Annual Golf Tournament, which will take place on Friday, September 6th at Hogan Park Golf Course in Midland. This event, led by our Golf Tournament Chair Jeane e Reyes, delivers the most contribu ons for scholarships each Spring to students wan ng to pursue a career in the petroleum industry. Last year, we awarded 40 scholarships ($141,000) to deserving students from our immediate area. This year, we hope to surpass that number and help more students pursue their dreams. We would like to recognize the event sponsors that have contributed so far! This year sponsors include Title Sponsor: ProPetro, Pla num Sponsors: Endeavor Energy Resources & NexTier Comple on Solu ons, and all the other admirable companies dona ng for a great cause. There is s ll me to donate. Join these companies on inves ng in the next genera on and their future! The full list of sponsors will be detailed in the next Pipeline
Delivering value to our current members and encouraging new members, we have addi onal event opportuni es planned for September.
Sept. 5th SPE PB Reservoir Study Group (Reservoir and Comple on Characteriza on Leads to Improved Comple on and Well Spacing Economics in Several US Plays),
Sept. 9th SPE PB & UTPB Resume Review Workshop (Help mentor a student to enhance their Interview and resume skills),
Sept. 12th SPE Permian Basin Sec on Welcome Back Happy Hour (come and network with SPE members and future members! Bring a friend and encourage them to join!),
Sept. 16th SPE PB General Sec on Mee ng (We will host Dis nguished Lecturer Steven Allan Canny at the Petroleum Club where he will present on Well DecomMISSION: Develop Sustainable Approaches to Decarbonize and Repurpose Wells)
Sept. 17th SPE PB Young Professionals September Event (Empowering Excellence in the Energy Industry).
You can see the full list and details of events on our website h ps://www.spepb.org/calendar-of-events or follow us on LinkedIn h ps://www.linkedin.com/company/spepb . I look forward to seeing you at the events!
This month I would like to recognize our Board Members for their relentless pursuit to deliver value back to our SPE members. We held our monthly in person board mee ng in August and par cipated in a Team Building Event called “The 6 Thinking Hats”, an idea given to me by a mentor. I would like to share this idea as it may help you with your next idea genera on, team collabora on or help organize your thinking processes. The Team Building event was designed to help us improve our thinking skills, foster collabora on, and generate new ideas for achieving our goals. The "6 Thinking Hats" is a book wri en by Edward de Bono, a renowned expert on crea ve thinking. The book describes a “means for groups to deploy a thinking (Con nued on Next Page)
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CHAIRMAN’S CORNER
process in a cohesive way, and in doing so, think together more effec vely”. The idea behind this method is that the human brain thinks in a few dis nct ways, and they can be split into categories deploying a key focus for that specific thinking method. The different ways of thinking are depicted as wearing a different thinking hat per focus area, hence “The 6 Thinking Hats” differen ated by different colors.
6 Thinking Hats
Specific Thinking Method facts, data, and informa on collect and analyzing relevant informa on and evifeelings, emo ons, and intui on express one's feelings and emo ons without jus ficacau on, cri cism, and risks evaluates the poten al problems, drawbacks, and op mism, benefits, and opportuni es explore the posi ve aspects, advantages, and value of crea vity, alterna ves, and innova on generate new ideas, possibili es, and solu ons management, control, and overview organize the thinking process, set the agenda, and
The event was a success, and we achieved the following outcomes: Improved our thinking skills by using different modes of thinking challenging our assump ons, fostered collabora on by listening to each other's views and respec ng each other's contribu ons, generated new ideas by exploring different aspects of the issue while combining different perspec ves, developed a clear plan by priori zing our ac on items, and most of all we enhanced our team spirit by working together and having fun. The ideas improved and generated from the event will help to deliver our goals for the year and add value back to our members. Adjacent you’ll see a picture of our board members with sunglasses on a er the event which represent our focus glasses. Now that we had the experience of wearing different hats through “The Six Thinking Hats” it’s me to put on our focus glasses and deliver value to our SPE Permian Basin Sec on.
Lastly, we are deeply saddened by the news of the passing of Autry Stephens, a legend in the petroleum industry and a long- me member of SPE. Autry was a visionary leader who built successful oil and gas companies and contributed to the advancement of the industry with his innova ve ideas and prac ces. He was also a generous philanthropist who supported many educa onal and charitable causes. Autry was a loyal and ac ve member of SPE for many years, and he was part of several special membership categories, including Legion of Honor Member, Senior Member, Life Member, and 25 Year Member. He a ended and par cipated in many SPE events, where he shared his insights and experiences with fellow members and inspired the next genera on of engineers. We cherish his contribu on to SPE and the value he delivered to the industry. He will be greatly missed by all who knew him and worked with him.
Thank you,
Chairman of the Board of Directors
TECHNICAL TOUR
Josh Dixon and Nathan Nemeth, Wood Mackenzie
Efficiency is up, costs are down
A er almost three years of cost infla on, 2024 is proving to be a turning point as some well costs begin to trend downward. And for some E&Ps, reduc on in cycle mes will unlock addi onal pathways to capital efficiency.
Lower prices for materials and equipment plus faster opera ons will reduce average well costs by about 10% in 2024 versus 2023. Consumables are leading the way for cost reduc ons, with defla on in OCTG and proppant prices accoun ng for almost two thirds of recent savings. Costs for services including rigs and frac equipment, however, have declined modestly but remain s cky. As demand for higher spec equipment has expanded, OFS companies con nue to re re older units ensuring that margins remain high. But this march towards higher spec rigs and pressure pumping equipment is one of the biggest enablers of efficiency gains.
Efficiency improvements are sustainable through market cycles. Wood Mackenzie es mates that since 2018, rig efficiency has improved by 60% and comple on efficiency has improved by more than 100% with the deployment of batch comple on techniques such as simul-frac. This improved D&C cycle me means companies can do more with less by dropping rigs and keeping produc on flat. So far in 2024, Permian E&Ps including Diamondback, Permian Resources and others have announced plans to cut rigs while maintaining or increasing produc on guidance.
Efficiency is improving through a combina on of improved technology and new ways of deploying exis ng resources. A common misconcep on is that efficiency gains are simply due to higher rates of drill bit penetra on and shorter cycle mes for frac stages.
Well cost es mates – Delaware Wolfcamp
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Technical Tour
While new equipment and advanced technology is enabling improvement in these areas, even bigger efficiency gains come from down me elimina on.
On the drilling side, widespread adop on of rotary steerable drilling assemblies and other downhole sensors have enabled companies including SM Energy, Marathon and EOG to stay on bo om for longer. By drilling longer laterals and elimina ng trips in and out of the hole, more rig me is allocated to delivering reservoir, and less to non-produc ve down me. In South Texas, SM Energy alone has increased drilling efficiency by 20% in less than two years.
Comple ons ac vity is cu ng down me, too. Simul-frac is not fundamentally different technology than conven onal comple ons techniques but enables comple ons of mul ple wells at the same me without the need for mobiliza on/demobiliza on downme. Here Ovin v stands out by almost doubling completed feet per day since 2022 by using trimul-frac on over 50% of its wells in 2024.
Increased adop on of simul-frac and batch-drilling makes the shi towards supersized mul -well pads more a rac ve in the Permian. Cube and row developments further reduce rig-move down me and open further poten al for savings as connec ons to grid power and centralized gathering networks becomes more jus fiable.
The variables of well costs, rig counts and cycle mes will con nue to fluctuate, but we expect efficiency gains to con nue and will enable operators to keep cu ng capex while modestly growing produc on. Last year marked a significant milestone in the history of US crude produc on. It was only the second year that ght oil produc on grew while the rig count fell year-over-year and is poised to repeat in 2024.
Lower 48 capex versus annual new well oil produc on
Source: Wood Mackenzie. Bubbles sized according to average annual rig count. Wood Mackenzie, Baker Hughes, EIA; data inclusive of Permian, Bakken, Eagle Ford, SCOOP-STACK-Cana , DJ Niobrara and Powder River plays.
TECHNICAL TOUR
Not every company will be able to realize significant efficiency gains
The unique situa on of each company’s acreage posi on, procurement departments and balance sheets determine the running room for efficiency gains.
Economies of scale are not an op on for some E&Ps. Simul-frac only delivers significant me and cost savings when deployed on large mul -well pads. And three- and four-mile laterals are only drillable where companies have secured large con guous acreage posi ons. But these are becoming more common. M&A in 2022 was defined by bolt-on deals, and 2023 was a banner year of mega deals in the Permian resul ng in extensive con guous acreage posi ons that made larger concentrated developments more a rac ve. We expect to see more small deals and trades in 2024 as buyers right-size their recent acquisi ons which will lead to further improvement in con guity for some companies.
But concentra on of opera ons poses some unique challenges. The planning lead me, and the need to secure vast volumes of sand, water and other consumables adds to up-front cost. Increasingly lumpy produc on profiles as mulwell pads are put on produc on at the same me puts addi onal strain on surface facili es and gathering infrastructure. In it’s Q1 2024 earnings call, Devon outlined how infrastructure bo lenecks are forcing it to hold back produc on in some areas. Some E&Ps are addressing this challenge by increased capital alloca on to gathering and processing infrastructure. Chevron, Devon and BPX Energy have all allocated over US$100mm annually to gathering, transport and processing facili es in recent years. Limited access to gathering infrastructure, inability to build capacity or a reliance on a constant cashflow may limit the ability for smaller E&Ps to reap the efficiency gains from economies of scale.
Where do costs go from here?
Cost reduc ons have a floor, and efficiency gains have a ceiling. Future cost trends depend on the outcome of the ba le between these two factors. This means price trends will be operator-dependent based on the technology and equipment used. OFS providers will look to defend and try to expand margins. With stronger balance sheets, an cipated increases in ac vity levels and high demand for their most efficient equipment, service companies will feel less need to concede on pricing.
The largest producers with the scale to commit to longer-term contracts (one to three years) for new equipment such as electrics fracs, will realize addi onal efficiency gains and keep costs lower. The most in-demand equipment will be high-spec, efficient and enable lower emissions. Simul-frac and trimul-frac will become the industry standard. AI, machine learning, downhole monitoring, and big data will unlock further upside. Smaller producers will be most exposed to infla on headwinds arguably mo va ng even more M&A.
We believe further progress will help ght oil operators alleviate some investor concern around eroding capital efficiency worsening. While the industry will eventually hit the ceiling on cycle me gains, addi onal opportuni es –par cularly around removing non-produc ve comple on capex – remain.
PPDC Courses
Midland College PPDC
221 N. Main Street Midland, TX 79701 (432) 683-2832
h ps://mcce.midland.edu > Oil & Gas Training
Online Division Order Cer ficate Program: Module 6 of 6 - Oil & Gas Contracts
Instructor: Alyce Hoge
September 4-30, 2024
Cost: $612.50, Out of State: $637.50
Online Lease Cer ficate Program: Module 6 of 6 - Federal Laws Impac ng the Oil & Gas Industry
Instructor: Alyce Hoge
September 4-30, 2024
Cost: $612.50, Out of State: $637.50
Online PLM Cer ficate Program: Module 6 of 6 - Federal Laws that Impact the Oil & Gas Industry
Instructor: Alyce Hoge
September 4-30, 2024
Cost: $612.50, Out of State: $637.50
Advanced Structured Query Language (SQL)
Instructor: Mark Edgar
September 10, 2024, 8:30 a.m. to 5:30 p.m.
Cost: $600, Out of State: $625
Finance for Non-Financial Professionals
Instructor: Pat Lipovski
September 10-11, 2024, 8:30 a.m. to 4:30 p.m.
Cost: $2,100, Out of State: $2,125
Permian Basin STEPS
September 10, 2024, 8:30 a.m. to 11:30 a.m.
Open to the public!
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The Engaging & Influen al Leader Instructor: Pat Lipovski
September 12-13, 2024, 8:30 a.m. to 4:30 p.m.
Cost: $2,100, Out of State: $2,125
Plugging the Holes in Your Pockets - Microbes, Mechanical Integrity, and Asset Protec on Instructors: Dr. Kerry Suble e & Dora Taggart
September 17, 2024, 1:00 p.m. to 5:00 p.m.
Cost: $100, Out of State: $125
American Society of Safety Professionals – Permian Basin
August 21, 2024, 12:00 p.m. to 1:00 p.m.
Introduc on to Power BI for Oil & Gas Instructor: Zack Warren
September 23, 2024, 8:30 a.m. to 5:30 p.m.
Cost: $650, Out of State: $675
Oil & Gas Performance Metrics: Concepts & Applica ons Instructor: Jim Tague
