I was in the bar of a nice restaurant in Edmonton a couple weeks ago when the guy I was talking with volunteered that sales at his artificial lift company haven’t been all that good in 2017. He told me, “I can see it being tough in Canada, but our sales in the US aren’t good either. I don’t think oil companies are running artificial lift like they used to.” I told him I agreed. As we’ve stated here before, by this point in a cycle, artificial lift systems should be flying off the shelves. Sales in 2017 should be up 20% over 2016, but they aren’t. The market is up only an anemic 5% over last year. Lift sales are our first clue about how E&P companies are approaching shale field developments: The focus is on getting the crazy long laterals drilled fast and cheap, getting them frac’d for the lowest possible cost, and on stream as quickly as possible. The idea is to produce the well as hard as possible. Global Artificial Lift Sales (Billions)

I was in the bar of a nice restaurant in Edmonton a couple weeks ago when the guy I was talking with volunteered that sales at his artificial lift company haven’t been all that good in 2017. He told me, “I can see it being tough in Canada, but our sales in the US aren’t good either. I don’t think oil companies are running artificial lift like they used to.”

I told him I agreed. As we’ve stated here before, by this point in a cycle, artificial lift systems should be flying off the shelves. Sales in 2017 should be up 20% over 2016, but they aren’t. The market is up only an anemic 5% over last year. Lift sales are our first clue about how E&P companies are approaching shale field developments: The focus is on getting the crazy long laterals drilled fast and cheap, getting them frac’d for the lowest possible cost, and on stream as quickly as possible. The idea is to produce the well as hard as possible.

Global Artificial Lift Sales (Billions)

My friend’s statement in the bar was simply the most recent of related comments we’ve heard over the last 6 weeks. I’ll share some of these first-hand comments: ”Most of our customers are saying: Drill the well cheap and fast, frac it hard, produce it as long as it will flow, shut it in. They are willing to give up the last 50 years of a well's life.” – directional driller "We incentivized our drilling engineers to drill feet of hole as quickly as possible. In every drilling meeting I would tell them, I don't care if you can drill a tight curve, I need a long, smooth path so I can get my artificial lift equipment into the well. They would leave the meeting and go right back to drilling fast and with a lot of dog legs. We've always had a hard time getting the drilling team to think about the needs of the production department, but this problem may be worse now and the impact might be harsher." – production technology manager ”I have been asking service companies for years how we plan to deplete laterals. No one has provided a sufficient answer. The best answer may be to develop a low volume submersible or a pump with a motor at the end of the lateral. I predict major disruption at low volumes leaving a large area under the decline curve unproduced.” – production manager “Sucker Rod sales have not been great this year.” – artificial lift salesman Here’s what I’m taking away from these comments: First, in the US a typical well life might now be 3 years, not 50. Second, not as much oil will be recovered from these wells as is being advertised. Third, even at $100 per barrel, wells with 10,000’ laterals may leave a lot of oil in the hole. Fourth, the prize is huge for the company who can develop a low cost lift technology that works in a long horizontal well. Alarmingly, today in drilling, we’ve begun sprinting the marathon from the startline, without a plan for what we will use to complete the run after our legs have given our from under us. Long laterals are fairly short-sighted. 

My friend’s statement in the bar was simply the most recent of related comments we’ve heard over the last 6 weeks. I’ll share some of these first-hand comments:

”Most of our customers are saying: Drill the well cheap and fast, frac it hard, produce it as long as it will flow, shut it in. They are willing to give up the last 50 years of a well's life.” – directional driller

"We incentivized our drilling engineers to drill feet of hole as quickly as possible. In every drilling meeting I would tell them, I don't care if you can drill a tight curve, I need a long, smooth path so I can get my artificial lift equipment into the well. They would leave the meeting and go right back to drilling fast and with a lot of dog legs. We've always had a hard time getting the drilling team to think about the needs of the production department, but this problem may be worse now and the impact might be harsher." – production technology manager

”I have been asking service companies for years how we plan to deplete laterals. No one has provided a sufficient answer. The best answer may be to develop a low volume submersible or a pump with a motor at the end of the lateral. I predict major disruption at low volumes leaving a large area under the decline curve unproduced.” – production manager

“Sucker Rod sales have not been great this year.” – artificial lift salesman

Here’s what I’m taking away from these comments:

First, in the US a typical well life might now be 3 years, not 50. Second, not as much oil will be recovered from these wells as is being advertised. Third, even at $100 per barrel, wells with 10,000’ laterals may leave a lot of oil in the hole. Fourth, the prize is huge for the company who can develop a low cost lift technology that works in a long horizontal well.

Alarmingly, today in drilling, we’ve begun sprinting the marathon from the startline, without a plan for what we will use to complete the run after our legs have given our from under us. Long laterals are fairly short-sighted.