Fatigue and the Oilfield

The Oil and Gas Industry has seen a tremendous increase in productivity over the last three years. Companies have hired thousands of new employees and have yet to slow down in the South Texas area. Along with the rapid production and workforce growth, there has been an increase in all types of accidents and fatalities, many fatigue-related.

Fatigue-Related Accidents in South Texas

As the oil and gas industry gains momentum, there are an increasing number of industrial trucks on the highways. Truck drivers suffering from sleep deprivation are a well-known danger on the road. According to the Center for Disease Control and Prevention, insufficient sleep is a public health epidemic.

“Sleep is increasingly recognized as important to public health, with sleep insufficiency linked to motor vehicle crashes, industrial disasters, and medical and other occupational errors. Unintentionally falling asleep, nodding off while driving, and having difficulty performing daily tasks because of sleepiness all may contribute to these hazardous outcomes,” states a CDC article entitled Insufficient Sleep Is a Public Health Epidemic.

A National Highway Traffic Safety Administration report, Drowsy Driving and Automobile Crashes, states that “Sleepiness causes auto crashes because it impairs performance and can ultimately lead to the inability to resist falling asleep at the wheel. Critical aspects of driving impairment associated with sleepiness are reaction time, vigilance, attention, and information processing.”

Hours of Service Exemptions

Amber Stanford of The Nations Law Firm states that “in recent times, there have been more than 300 oil and gas workers killed in highway related accidents, in large part due to the oil field industry exemptions from highway safety rules. "These exemptions allowed truck drivers to work extended hours, but it is being abused by some employers now pressuring their employees to drive after shifts that frequently extend beyond 20 hours,” and goes on to comment that “The most unfortunate part is that these accidents are only expected to increase over the upcoming years as more than 200,000 new oil and gas wells are expected to be drilled nationwide. This will include between 500 and 1500 truck trips per well, far more than what is currently required due to new drilling techniques. Although the wells will create many new jobs and economic benefits, it is coming at a deadly cost.”

Just because drivers are on an oilfield site does not make them any less vulnerable to the effects of fatigue. Yes, exemptions from federal hours of service regulations exist for oilfield service workers, but that doesn’t mean they have to be taken, much less abused. Sure, it’s tempting to both drivers and employers to use the exemptions to increase productivity and profitability. However once the cost to driver health and safety is factored in, burning the candle at both ends looks less like a viable standard operating procedure.

Eagle Ford Shale Conference

Del Mar College along with Texas A&M, Port of Corpus Christi, Work Source Solutions, Eagle Ford Shale Consortium, and the Corpus Christi Chamber of Commerce have teamed up to address this and many other related issues. On September 27th & 28th at the Solomon Ortiz Convention Center in Corpus Christi, Texas, Del Mar College will host the Eagle Ford Shale Conference. The conference will concentrate on topics such as:

  • Transportation and Logistics
  • Trucking (safety, regulations, requirements, training)
  • Railroad (capacity)
  • Shipping (barge/ship activity)
  • Pipeline (development, storage tanks, export oil)
  • CDL Driver Demand
  • Employment Opportunities
  • Safety Awareness
  • Community Growth and Opportunities

Visit the Eagle Ford Shale Conferences and Events page for more information.

1,500 Eagle Ford Wells Waiting to Be Completed?

Are there really as many as 1,500 wells sitting idle until a completion crew arrives on the scene? Comments regarding the size of well backlogs is coming up more frequently. At Bentek's Benposium a few weeks ago the comment was made that Marcellus production would grow through the end of the year even if operators stopped drilling. Wow. We're in a similar situation in the Eagle Ford. If you carry the trend forward, the play will be approaching 2,500 producing wells by the end of June 2012. Add a well backlog of 1,000-1,500 and you see why analyst are raving about production growth. Estimates of 1,100-1,200 are the most common, but we've seen 1,500 mentioned by the most bullish analyst.

If 1,500 is correct and service companies catch up, the producing well count will grow by 60% without any drilling. Drilling has raced ahead of completions by 4-6 months. That's not sustainable. Operators don't make a return until wells start flowing. Expect a big push in 2012 to drive inventories down.

Consider the +/-250 rigs that are drilling and we're getting +/-250 wells drilled and awaiting completion each month. Drilling at this rate isn't going to ease pressure on service companies.

How Big is a Normal Eagle Ford Well Back Log?

That should be the first question everyone asks. At first blush, I don't know what is normal, so 1,000 wells sounds like a lot, but maybe not......

In an area with infrastructure constraints, I'd expect the well back log to be higher than other areas of the country. A 1-2 month backlog wouldn't be surprising. Waiting six months to bring a well online after drilling is completed is a problem. Don't expect this trend to last. Capital budgets for most operators are already pressured by low natural gas prices. Infrastructure and service constraints aren't going to make any management team happy. My estimate is we'll approach a normal inventory of 1-2 months over the next two years. At that time, most operators will be in full development mode and the constraints of today will be behind us.

I'd love to hear what you guys are seeing in the field. Is your company catching up? Share your experience in the comment section below:

Dallas Fed Report "Eagle Ford Shale Brings Wealth to South Texas"

The Dallas Federal Reserve bank is the latest organization to publish a report touting the economic benefits of the Eagle Ford.

Recent data suggest that the oil boom’s impact on jobs, income and spending in the region has been profound.

Other highlights include:

  • Between 2007 and 2011, gas production rose 20%, oil 80%, and condensate 541%
  • From Feb 2010 to Feb 2012, the rig count grew from 42 to over 225
  • Horizontal drilling accounts for over 90% of Eagle Ford wells
  • An estimated lease bonus of $1,500/acre x 5 million acres = $7.5 billion paid since 2007
  • Estimated drilling spend has risen from $1.8 billion in 2007 to $14.6 billion in 2011
  • Local royalty payments increased by $584 million from 2007 t0 2011
  • Biggest industry winners include: oil exploration and services, construction, wholesale and retail trade, and real estate.
  • Seasonally adjusted retail sales in the 23 county area grew 15.4% compared to 6% for Texas and 7.4% for the U.S.
  • Sales tax revenues grew 9.3% over the same period
  • Eagle Ford jobs represent 2% of the Texas workforce
  • Annualized growth in weekly wages was 14.6% vs. 6.3% for the U.S.

Read the entire report at dallasfed.org

Bank Lending Can't Keep Up with Deposit Growth

Growing deposits at banks in South Texas has been news ever since lease bonuses from the Eagle Ford began rolling in. Now, rising salaries combined with royalty income means deposits are rising faster than the banks can lend. At 20 banks surveyed by MySA:

  • Deposits increased by 46.8%+ at 12 of the 20 banks - (National Avg 14.7%)
  • Karnes County National Bank led the region with 110% deposit growth ($168 million)
  • 14 of the 20 banks reported loan growth between 6.5% and 62.2%

That's all since the end of 2009. While it has been slow to date, lending will grow as more commercial, retail, and multifamily developments come to the area. For now, I'll say having too much money is a good problem to have. Get more details in the full article at mysanantonio.com

 

Eagle Ford Regional Rig Count at 276 - June 1, 2012

Eagle Ford Shale Well Map
Eagle Ford Shale Well Map

The Eagle Ford Shale drilling rig count fell three this past week to settle at 276. The biggest risk to development is unfolding in the commodity market. Oil and gas prices both fell this past week. Even with good financial returns at lower prices, cash flow used to fund capital budgets is hit almost immediately when prices fall. If today's prices hold, we'll see companies cut back across the U.S. in coming months.

ConocoPhillips Eagle Ford Shale position is up for review this week. Conoco has over 200,000 core acres where the company is targeting the Eagle Ford. The company grew production to more than 50,000 boe/d at the end of 2011 and plans to reach more than 100,000 boe/d by the end of 2012. The company has 6 rigs drilling in DeWitt County, 5 in Live Oak, 4 in Karnes, and 1 in Gonzales County.

Eagle Ford Oil & Gas Rigs

The natural gas directed rig count (Smithbits) fell five rigs to 70 running. Karnes, McMullen, and Webb counties all have more than ten rigs targeting natural gas. Henry Hub futures prices lost almost a dime after poor economic data was reported on Friday. Natural gas was trading at $2.32/mmbtu on Friday afternoon. With a glut of production in the Lower 48, poor economic indicators will pour fuel on the proverbial fire. Oil prices fell almost 10% over the past week. WTI is trading at just over $83/bbl. During the past week, oil directed activity rose to 205 rigs. Levels of more than 200 rigs drilling for oil will not be sustained if oil prices continue the recent plunge from $100/bbl.

254 horizontal rigs are running in the region, with 1 disposal well being drilled in Atascosa County. Karnes County leads development with 38 rigs and La Salle has 37 rigs. Dimmit (31), McMullen (28), Gonzales (24), DeWitt (23), Webb (23), Atascosa (11), and Live Oak (11) make up the top Eagle Ford counties.

News items this week included:

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Drilling Rig Count by Operator

What is the Rig Count?

The Eagle Ford Shale Rig Count is an index of the total number of oil & gas drilling rigs running across a 30 county area in South Texas. The South Texas rigs referred to in this article are for ALL drilling reported by SmithBits and not solely wells targeting the Eagle Ford formation. All land rigs and onshore rig data shown here are based upon industry estimates provided by the Baker Hughes Rig Count and/or Smith Service Co's (Schlumberger) Smith Rig Count.

Drilling Rigs by County