With all of the bankruptcy news, a recent report has received little fanfare in the frac sand industry, but I think the report is worth notice. Rystad Energy was commissioned by the Wisconsin Industrial Sand Association to “perform an objective analysis on the operators that have switched away from NWS to see whether there has been an impact on their respective well productivity.”
The report can be viewed here: https://nwsinfo.s3-us-west-2.amazonaws.com/RYSTAD+Energy+Study.pdf
Some quick highlights (quoted) out of the Executive Summary:
- The Permian Basin has seen the highest penetration of in-basin sand historically and hence the study has a high number of cases with sufficient data from that basin.
- Overall, Rystad Energy has studied a total of 15 operator cases across the major North American basins, of which 8 have sufficient data to be studied in detail and included in this updated report. Only operator case studies with high confidence of sand type usage and timing of shift to in-basin have been analyzed.
- 6 out of 7 Permian case studies exhibit reduced well productivity following switch to in-basin sand, as classified as either light impact or impact.
- Rystad Energy has classified each of the case studies as either showing no impact, light impact, or impact. No impact cases demonstrate increases in average IP270 in the quarters following in-basin sand adoption compared to the quarters prior to adoption. Light impact cases show signs of production declines after switching to in-basin sand, however, average IP270 rates decline less than the allowable degradation caused in the first year of switching to in-basin sand required to wipe out the cost savings of the switch. Finally, cases classified as impact show clear signs of productivity declines after switching to in-basin sand where average IP270 rates have declined further than the allowable first year degradation.
- Short-term IP rates are holding up in certain case studies following switch to in-basin sand, while latest injection of data points towards declines in longer-term IP rates.
- In-basin sand adoption is still in an early phase in most major basins; outside the Permian, very few case studies have been identified with significant data to analyze well production impact.
- Permian results suggest there is impact on productivity, though for three of the identified cases the reduced production does not outweigh likely cost savings.
The Petroleum Connection has not thoroughly reviewed this report yet, but it seems to suggest that for some operators the switch to in-basin sand might be detrimental. That said, the operators themselves must be looking closely at their own internal data and making their own assessments. Outside of the Eagle Ford, I have not heard of any shifting back to Northern White Sand. Definitely something we need to keep an eye on, however, as this could have a big impact on not only frac sand companies and investors, but also the various supply chain solutions offered.