U.S. shale drilling, fracing costs to drop 10% this year, Wood Mackenzie says

(Bloomberg) — The cost to drill and frac new wells in U.S. shale basins is expected to drop about 10% this year as explorers look to get more for less amid record output, according to a report from Wood Mackenzie.

The energy data and analytics firm said in a report Monday that while costs should come down another 1% next year, any further reductions will be tough as oil field contractors look to keep their own margins high. 

“Both E&Ps and service providers are emphasizing significant efficiency improvements, albeit for different reasons,” Wood Mackenzie’s Nathan Nemeth said in the report. “If E&Ps look to reduce costs more, it must come from additional efficiency improvements, as OFS pricing is unlikely to fall.”

The world’s biggest oil field service providers and their clients have been pushing for longer sideways wells, faster frac jobs and greater use of automation in order to bring shale costs down. Service providers are using efficiency gains to keep their prices from slipping while explorers want to bring down the overall cost of the job so they can send more profits back to shareholders.