While directional drilling and hydraulic fracturing have enabled tight-rock resources to be exploited successfully in recent years, it remains an imperfect and inefficient technology, according to Schlumberger North America president Robert Drummond. He poses the question, Where do we go from here?

“Even though we've been very successful, still as many as 30% of wells drilled are uneconomic today. Maybe we need to look more at individual well performance,” he said, addressing attendees of IPAA's Annual Meeting in San Antonio recently.

As many as 33% of attempted cluster perforations do not produce anything, he said, citing scores of log data. That's wasted money poured down a hole in the ground.

“The next step forward will be around optimizing completions,” he said, alluding to Schlumberger's ongoing research. “A little bit of reservoir characterization in these horizontal sections can better place these fracs and end up getting a lot more return on investment on the frac money that you're already spending.”

He noted that during the past four years in the major unconventional basins, lateral lengths have doubled and the number of stages in those laterals has doubled as well.

“What have we gotten out of that? At the end of the day, average well production is still relatively flat, but the overall accumulative result has been good.”

Schlumberger is experimenting with diverting hydraulic stimulation pressure across the lateral to treat more of the rock.

Instead of the fracture following the path of least resistance during the entire pump job, a diverter material is pumped in at a certain point “that creates a pressure differential to make the frac initiate elsewhere.” Schlumberger is field-testing the technique, “and we're having good results,” he said.

The objective is to get more production by stimulating less. “That will make a difference on return on investment.”

Drummond said Schlumberger closely watches the downside of commodity prices when planning its strategy. The downside for oil, he said, is $80, where the oil rig count would probably react negatively.

“We don't anticipate that occurring in 2014,” he said.

The downside for natural gas, however, is already in, with little risk for a further drop in the gas-directed rig count. However, the upside appears capped as well.

“The upside today for North America land [operators] is directly linked to what happens with natural gas. It's certainly a demand story,” he said. “It doesn't look like it's going to be anywhere above $4.50 sustained to see any kind of increase in rig count.”

The Marcellus shale has been able to react to decline rates in every other basin one-for-one, “and they're not even trying hard,” he said. “The rig count is pretty level out there. It will be several years before we see drilling for dry gas increase by any substantial level.”

—Steve Toon