Lower 48 service sector: how much does a recovery cost?

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Report summary

Lower 48 operators are optimistic about a return to growth in 2017. As companies beef up capital budgets and accelerate drilling programs, cost inflation will be an inevitable consequence for profit margins. On the flipside, the onshore oilfield services sector has taken a beating during the downturn. As activity ramps-up onshore, and service companies begin to recapture margins, will we see a return to 2014 pricing levels? In this insight we analyze the three major cost components of D&C capex from a utilization perspective to quantify what level of pricing increase can be expected in 2017. Overall cost inflation will vary basin-to-basin with the Permian, and its accelerated pace of activity, leading the way. How are the economics of other key tight oil basins impacted by an increase in upstream costs? Which operators are most exposed to pricing increases and what is being done to mitigate pressure? Read on to see Wood Mackenzie's view on onshore cost inflation and more.

What's included

This report contains

  • Document

    Lower 48 service sector: how much does a recovery cost?

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Table of contents

  • Emerging from trough pricing in 2017
    • Pressure pumping: 20% cost inflation
    • Horizontal rigs: 10% cost inflation
    • Proppant: 15% cost inflation
  • Not all inflation is created equal
  • Rising costs increase breakevens
  • Corporate exposure to onshore cost inflation
  • Final verdict on cost inflation

Tables and charts

This report includes 9 images and tables including:


  • D&C capex breakdown (2017 Delaware Wolfcamp Reeves Core type well)
  • 2017 Lower 48 cost inflation assumptions based on growth in basin spend
  • 2017 new drill production at risk per key tight oil play
  • NPV10 breakeven price for Wolfcamp, Eagle Ford and Bakken type curves (2016-2017)
  • Cumulative cash flow for key tight oil type curves
  • Corporate exposure to cost inflation across the Lower 48
  • Lower 48 key tight oil play completions (2014-2018)
  • US total land rig count (2014-2017)
  • Proppant loading by key tight oil play (2014-2016)

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