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Westwood Insight: is history repeating in the US pressure pumping market?

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Oilfield Technology,

Since 2012, the percentage of horizontal rigs running in the Permian Basin has steadily increased. The percent of horizontal rigs in the Permian grew from 14% in January 2013 to 27% in January 2015. Now, the Permian accounts for over 42% of the active horizontal rigs in the US land market.

This year, the Permian gained 100 horizontal rigs, representing a 46% increase in horizontally directed rigs. The year-on-year horizontal rig increase is a staggering 174% for the prolific basin. This time last year, there were only 118 horizontal rigs active, yet the percentage of horizontal rigs continued to increase. Today, there are 318 active horizontal Permian rigs compared to the peak of 353 horizontal rigs at the end of 2014.

US pressure pumpers make moves

As the market recovered, pressure pumpers across the US made strategic acquisitions, filed for IPOs, and partnered with former competitors to gain market share and regional presence in the Permian. Schlumberger partnered with Weatherford to create OneStim, a pure-play hydraulic fracturing business serving North America.

FTSI intends to IPO on the NYSE as FTSI. As of January 2017, the company operates 32 frac fleets with a diverse customer base across the Permian, Eagle Ford, and SCOOP/STACK. Patterson-UTI (NYSE: PTEN) acquired Seventy Seven Energy’s Performance Technologies frac fleet, bringing their total HHP to 1.5 million. Keane (NYSE: FRAC) acquired Rockpile adding 245 000 HHP, 8 wireline trucks, 12 workover rigs, and 10 cement units. ProPetro (which listed in March this year, NYSE: PUMP) is a pure-play pressure pumper currently focusing only on the Permian. Liberty Oilfield Services filed for IPO and plans to list on NYSE under the ticker symbol BDFC.

Will history repeat itself? The increase in demand for horizontal rigs in the Permian is creating a shortage of hydraulic horsepower in the Delaware and Midland Basins. Pressure pumpers are reactivating and building new fracturing fleets in a similarly aggressive way to the market of 2012 and 2013.

That growth cycle ended abruptly at the end of 2014 with an oversupplied oil market crashing the oil price, leading to the demise of several pressure pumpers including C&J Services, Trican, Sanjel, and many smaller pressure pumping companies.

Only time – and the oil price – will tell.

Todd Bush, Energent (Part of the Westwood Global Energy Group) or +1 (281) 846 4425

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