Producers reap benefits of retooling

The technological shift to high-efficiency oil and gas drilling is the single biggest change in production since oil prices crashed, the chief executive of an industry analytics company said Thursday.

Allen Gilmer, chairman of DrillingInfo, says the best oil and gas operators are getting as much as 50 percent higher returns compared with the average producer, and two to three times the production of the least-efficient operators.

Before the crash, with oil at $100 a barrel, companies were made or broken by their access to cheap cash, Gilmer said in an interview at this week’s North American Prospect Expo, now called NAPE.

Now with oil priced at about $40, the difference between success and failure isn’t inexpensive loan rates, he said: “It’s really how efficiently you can extract the hydrocarbons.”

Gilmer and his company have compiled data on oil and gas formations, drilling and production over the past nine years. It shows the shale boom and corresponding price collapse changed the way companies operate, he said.

Companies had to cut tens of thousands of workers and reduce other costs. That forced many to find more efficient drilling and recovery processes.

The new technology is even prompting big oil companies like BP and Chevron, which weren’t as active in fracking, to devote new divisions to U.S. shale production. They hope to innovate as quickly as smaller independent producers.

The benefits could be great.

The average Texas well produces nearly 25 percent more than it did last year, Gilmer said, and there are billions of barrels still to capture.

“The size of the prize here in the United States is mindblowing,” he said.