Compellingly Positioned to Answer Growing Industry Demands
ProPetro is strategically located and focused in the Permian Basin, one of the world's most attractive regions for oil field service operations as a result of its size, geology, and customer activity levels. The Permian Basin consists of mature, legacy, onshore oil and liquids-rich natural gas reservoirs that span approximately 86,000 square miles in West Texas and New Mexico and is characterized by multiple prospective geologic benches for horizontal development.
Tapping the Largest U.S. Oil Resource Base
Rystad Energy estimates that, as of November 2016, the Permian Basin contains approximately 58 billion barrels of oil, the largest recoverable crude oil resource base in the United States and the second largest in the world. As a result of its significant size, coupled with the presence of multiple prospective geologic benches and other favorable characteristics, the Permian Basin has become widely recognized as the most attractive and economic oil resource in North America.
Since May 2016, Permian Basin rig counts have grown by more than 110% to 291 active rigs as of January 2017. This increase in Permian Basin rig activity has accounted for more than 50% of the total U.S. rig count growth over that time period, more than three times the combined number of rigs added in the Bakken and Eagle Ford shales.
The Midland Basin: Our Current Focus
The Permian Basin is divided by the Central Basin Platform, creating the Midland and Delaware sub-basins, which have each contributed to the overall growth in the Permian Basin. The Midland Basin is the more delineated and mature resource-play of the Permian Basin's sub-basins and is the current focus of our operations.
Operational improvements in the basin have driven heightened oil production in recent years as a result of increasing levels of pad drilling, downspacing, and capital efficiency. Initially delineated with thousands of vertical wells, today its resource potential is further enhanced through horizontal drilling and completion efficiencies. Rystad Energy estimates the Midland Basin's recoverable oil resource to be over 27 billion barrels, second in the United States only to the geographically adjacent Delaware Basin.
The Delaware Basin: Expanding Our Presence
Accounting for more than 50% of the Permian Basin's growth in rig activity since May 2016, the Delaware Basin has become a premier, complementary resource base to the Midland Basin. Rystad Energy estimates the recoverable crude oil resource in the Delaware Basin to be slightly greater than the Midland Basin, at approximately 28 billion barrels. E&P operators have actively delineated acreage in the Delaware Basin, having successfully targeted nine distinct zones with horizontal penetration. As the less-developed of the two primary Permian Basin sub-basins, the Delaware Basin represents a high-growth opportunity for E&P companies, many of whom have entered the basin through large-scale acquisitions.
As activity levels increase in the Delaware Basin, we have begun to expand our presence in the region in tandem with increasing activity levels and demand-pull from our core customer base.
Key Drivers of Increasing Demand
In addition to increased drilling activity levels in the Permian Basin, an ongoing shift to larger and more complex well completions has significantly increased per-well demand for the hydraulic fracturing and other completion services we offer. According to Spears & Associates, key drivers of this increasing service intensity include:
- Longer horizontal wellbore laterals. Average Permian Basin lateral lengths are expected to grow from an average of 5,000 feet in 2013 to an estimated average of 9,000 feet anticipated in 2017. Management estimates that leading-edge Permian Basin lateral lengths are currently approaching 12,500 feet.
- More frac stages per lateral. Frac stages per well are expected to increase from 15 stages per well completed in 2013 to approximately 42 stages per well completed in 2017.
- Increasing amounts of proppant per well. Permian Basin sand use is expected to grow from an average of 1,100 pounds per foot of proppant per well in 2015 to approximately 1,800 pounds per foot of proppant per well anticipated in 2017.
100% Utilization of Our Fleet
Rising producer activity levels, increasing basin service intensity and continued drilling and completion efficiencies have combined to drive the 100% utilization of our fleet and build a sizable backlog of addressable demand for our services. We have seen our competitors defer necessary maintenance spending and cannibalize idle equipment for spare parts. This has resulted in tightening hydraulic fracturing supply and demand fundamentals and is likely to drive continued pricing improvement for our hydraulic fracturing services. Moreover, we believe the other complementary services that we provide are well-positioned to similarly benefit from a continued industry recovery.