The best oilfield technology today is old news tomorrow, and discovering new ways to drill the undrillable remains the priority, according to top oilfield services executives.
Schlumberger Ltd., Halliburton and Baker Hughes Inc. continue to work on ways to advance exploration, drilling and completion techniques for customers far and wide, in the onshore and deepwater basins. The hook to capture and retain customers centers on new technology offerings.
"There is a strong appetite for better technology, and that's really the crux for most of the conversations I have with customers today is around how to make more barrels and what technology will allow them to do that," said Halliburton COO Jeff Miller. How to fracture (frack) wells efficiently and produce more barrels are "where we're seeing that increase in appetite," he told analysts during a quarterly conference call last Thursday.
"There is more activity, but every application of better technology in that higher-volume environment is able to create more value for our customers."
Customers are demanding "such a premium on making more barrels out of that existing asset that I think that's driving some of the appetite," added Halliburton CEO Dave Lesar.
New design techniques for evaluating, drilling and completing wells are only part of the job. There are offerings in the works day in and day out, as tools are perfected to improve reservoir characterizations and drilling, from multi-stage completion technology to new fracking fluid innovations, said Schlumberger CEO Paal Kibsgaard. There's little to wonder why it's at the top of the list for Schlumberger: revenues in 1Q2014 gained 6%-plus year/year, with North American revenues jumping 12%.
"The driving force behind these results is further market share gains on the back of growing new technology sales and expanding integration related activity as well as a relentless focus on operational excellence and efficiency," said Kibsgaard. By customer group, growth in 1Q2014 was driven by the national oil companies and the independents, which now represent more than 70% of revenue for the worldwide oilfield services leader.
Baker Hughes is unveiling new techniques on almost a monthly basis. The big drive today is a pressing need for better technology in the Permian Basin, once a formidable vertical drilling stronghold. Horizontal drilling now captures about half of the market. Operators want wells that are "deeper and harder," with more complex completions, said CEO Martin Craighead. "Production curves are declining faster, and the aging midstream infrastructure is working well beyond it's time.
"All of these trends are positive for the service industry and play particularly well to the strength that they produce," he said. "Our strategy is to leverage new technology development and our global supply chain to convert innovation into earnings..." The need to increase production and recovery rates "is universal" and fundamental to energy production.
All of the oilfield service providers, and most exploration and production companies, have in-house researchers, engineers and scientists working on more efficient and more productive wells. Better fracking designs are the center for many operators, Craighead said.
However, "I wouldn't want to be in that business by itself because we see it as the ultimate connector between wireline, completions, drilling services, reservoir evaluation, production engineering and artificial lift. It is the sensor of our world in many ways, and it stimulates technology in some of other areas based on what we can do in fracking." A lot of technology centers on improving well stimulations," but I think the way to look at it is what fracking does for some of the other product lines."
Halliburton's Miller noted that lateral lengths for onshore wells have increased to more than 10,000 feet, with stage density up by 20-25% year/year in many U.S. basins.
"The net result is that year/year we've seen average completion volumes per well increase by 30% for our customer set, which is driving demand for improved service efficiency at the wellhead," Miller said. "When it comes to how to complete, the goal is maximum reservoir contact..."
Houston-based Baker recently opened an artificial lift research and technology center in Claremore, OK, that includes a dedicated substation to operate fixed artificial lift systems up to 2,800 hp, each in several vertical and horizontal flow lifts that stimulate the different pressures and temperatures, fluid types and flow rates that could encountered in a producing well.
The testing center offers Baker capabilities and a 180-member team to "design, test and deliver future generations of production solutions beyond anything that exists today," said Craighead.
"But it takes more than just innovation to win in today's marketplace; it also takes execution," Miller said. "It's execution that is accelerating the pace of new product introductions...And it's execution that is growing our North American margins to mid-teens during the second half of this year..."
The push mostly remains on methods to extract more oil and liquids. U.S. natural gas supplies may be dwindling, but there's been no call yet to switch rigs to gas from oil/liquids. That may take sustainably higher prices, said Miller.
"We view sustainable prices north of $4.50 would be what's required to see gas move but we are seeing it support, probably cash flows for some clients," said Miller. "But if anything, the key takeaway is it would be a 2015 event."