In the modern 2020 capital discipline environment, how will service providers and E&Ps operate? Together with Rystad Energy, Shale experts Thomas Jacob and Ryan Hassler discussed the 2020 outlook and what one should be expecting in terms of capital expenditure drilling, completions, frac sand demand, projections, and pricing.

To start with, it’s essential to note that gas and oil pricing forecast is the driving force oilfield activity estimations; this, in turn, drives the estimates of service demand. Drilling and completions capital expenditure for 2020 is expected to go down 10% year over year. But because of drilling and completion efficiency gains coupled together with service price deflation, the activity won’t be at the same level, though.


Although there has been a decline in rig counts substantially, it hasn’t corresponded to an equal reduction in the number of wells drilled. Basically, as per a rig basis, we are drilling more wells. An excellent measurement of rig efficiencies is the number of drilled wells per rig.
Considering the capital expenditure for drilling and completions is estimated to be down 10%, what is inferred from that is we will see an 8% drilling activity reduction in 2020. So for the coming two years, the rig count is estimated to hover around that 800 mark.


As a result of budget exhaustion by the time 2019 was ending, completions were essentially pushed forward to 2020. For this reason, the second quarter of 2020 is due to rise. Generally, for 2020, the number of wells fracked is expected to see a reduction of 2% relative to 2029. The number of rigs being followed by a single frac crew has also increased. The corresponding ratio of frac crews to rigs is an excellent measure of the total drilling and completions efficiency.



US Land Frac Sand Demand forecast in 2020 estimated to increase 4%
Frac sand demand and growth is expected to rise 3%, reaching up to 120MMtpa. And for the next coming 5 years, demand is unlikely to surpass 140MMtpa.

The drivers for frac sand demand include:
The number of fracked wells
Sand intensity – this refers to the sand amount pumped as per a lateral foot base
Lateral length of the wells

With the cost of oil having a range of between $50-$60 per barrel, there is a limit on wells fracked. According to sand intensity, a majority of big plays in America stabilized per lateral foot at 2000-2500lbs. Due to the efficiencies at the wells, lateral lengths are on the increase, especially in Permian. That is where the expected demand and growth for frac sand comes from. In 2019, oversupply resulted in frac sand costs to fall significantly. But in 2020, this issue should be resolved.

To reiterate, capital expenditure is estimated to be down 10% while completions and drilling will see losses at 8 and 2%. Efficiency gains mainly drive this. All in all, there’s still room for growth throughout the U.S. As service providers and operators begin catching the leading edge, over the coming few years, we’ll continue seeing gains. This will give operators the chance to finish more workload in significantly less time, using the same equipment. The shale industry has entered a new era in terms of operations with operators applying more effort into supply chain optimization, cost savings, and efficiency gains.


Source: Rystad Energy, Drilling, and Completions Webinar. Nov 2019