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Page added on April 2, 2018
Peak Shale? Payback Time: Oilfield Services Raise Prices
Oilfield service providers are upping their prices, the latest Dallas Fed Energy Survey has found, confirming what producers began to complain about last year when oil prices started recovering.
The survey found the index of input costs for oilfield services jumped from 46.8 from 30.9 this quarter from last. The index for oilfield service prices was also higher in Q1 2018, at 27.9 from 22.6.
Further strengthening the view of an industry in recovery, the survey also found that the index for utilization of oilfield service equipment was higher this quarter, at 40.4. That’s up 11 points from the reading for the last quarter of 2018, the Dallas Fed noted.
Higher oilfield services prices began pressuring producers’ margins soon after the industry officially swung into recovery and growth mode. It was only to be expected because the services sector suffered a harder blow from the oil price collapse, with providers forced to offer huge discounts to drillers in order to stay in business.
Once prices began rising again, producers were eager to start pumping more again and not long after there was a shortage of frack crews and equipment on the horizon. This shortage led to a price spike for oilfield services and longer waiting periods. It also led to new optimism about the services industry.
This is only fair. After all, it was oilfield service providers that accounted for the bulk of the almost half a million layoffs in the industry during the downturn. It was oilfield service providers that greatly contributed to those notorious efficiency improvements that producers like to brag about so much. In the providers’ case, efficiencies meant cut-throat prices for their services.
The recovery is not universal, though, as Forbes’ Dan Eberhart noted in a recent story on the sector.
Smaller services providers—and even some big ones—are still in the red and struggling to return to profit. Consolidation is on the rise as is to be expected and, Eberhart argues, the current relationship between producers and service providers will need to change because in its current form it is unsustainable. Producers, in other words, might be in for a blow to their profit margins as service providers recover.
17 Comments on "Peak Shale? Payback Time: Oilfield Services Raise Prices"
MASTERMIND on Mon, 2nd Apr 2018 3:43 pm
Chevron CEO warns US shale oil alone cannot meet the world’s growing demand for crude
https://www.cnbc.com/2017/05/01/us-shale-cannot-meet-the-worlds-growing-oil-demand-chevron-ceo-warns.html
The IEA is grossly overestimating shale growth
https://oilprice.com/Energy/Oil-Prices/The-IEA-Is-Grossly-Overestimating-Shale-Growth.html
The Shale Gas Revolution Is A Media Myth
https://oilprice.com/Energy/Natural-Gas/The-Shale-Gas-Revolution-Is-A-Media-Myth.html
Peak U.S. Shale Could Be 4 Years Away
https://oilprice.com/Energy/Crude-Oil/Peak-US-Shale-Could-Be-4-Years-Away.html
Plantagenet on Mon, 2nd Apr 2018 5:26 pm
Shale oil production is going to peak…..the only question is when. The EIA is projecting that oil production from shale will grow for decades.
It doesn’t seem likely to me.
CHEERS!
Chico on Mon, 2nd Apr 2018 5:33 pm
Fracing services are falling again due to an overly aggressive addition of equipment and personnel in the fourth quarter of 2017. This was done in anticipation of rising prices in 2018. Not happening!!!!
Boat on Mon, 2nd Apr 2018 6:45 pm
Chico
Already happened. completions went up 25 two months in a row.
Anonymous on Mon, 2nd Apr 2018 6:55 pm
Breakeven only up a buck for the Permian. Can check last year’s survey versus this year’s.
Boat on Mon, 2nd Apr 2018 6:59 pm
Amouse
I read older $land, costs are $35. New production $land and costs are up to $55 per barrel. Talking the Permain.
MASTERMIND on Mon, 2nd Apr 2018 7:10 pm
Dream of US Oil Independence Slams against Shale Costs
It will take 2,500 new wells a year just to sustain output of 1 million barrels a day in North Dakota’s Bakken shale, according to the Paris-based International Energy Agency. Iraq could do the same with 60. Ultra-light oil makes poor-quality gasoline that has to be put through an additional process (and cost) called catalytic reforming that boosts octane to sales specifications. And most crucial is that this light oil lacks the middle distillates needed to produce diesel and jet fuel. Those are the three biggest refined product markets so ultra-light oil has a lot going against it.
Right now, the main approach is to blend the ultra-light with heavier grades of oil to create a mixture that can be put into refineries. This has created high demand for heavier oil (20-30 API gravity). The main sources for the U.S. are deep-water Gulf of Mexico, Mexico, Venezuela and Canada. Much of this heavy oil has problems of its own for refiners especially the syn-crude from Canada and Venezuela that contains large volumes of bitumen that requires a special kind of refinery (“cokers”) that can deal with the carbon and sell it as petroleum coke. Most of these refineries are in the Midwest (Chicago area mostly). The deep water GOM crude contains considerable sulphur that must be removed before refining further. As you can see, it is a complex problem. It reflects the fundamental premise of Peak Oil—namely, that we have run out of cheap oil.
https://www.bloomberg.com/news/articles/2014-02-27/dream-of-u-s-oil-independence-slams-against-shale-costs
https://imgur.com/a/t7ulB
MASTERMIND on Mon, 2nd Apr 2018 7:18 pm
Isn’t it amazing how so many companies/industries that lose so much money — Shale Fracking — Amazon — Uber — Tesla— Netflix— Twitter..etc.. Are able to keep the US economy afloat?
Obviously the US needs more money losing corporations — then we will have our recovery.
Who knows — perhaps this is another ‘flat earth moment’ — you know what I mean? Like at one point everyone thought the earth was flat — it was just so obvious — until it wasn’t.
Maybe it is the other way around — what we need is to foster an environment where corporations are losing many billions…. because this is what leads to prosperity … and jobs .. and higher wages…
Boat on Mon, 2nd Apr 2018 7:28 pm
Mm
It’s called maximizing other people’s money while becoming the richest in the world. Jobs are ment to be eliminated along with huge amounts of expensive infrastructure. Bring on the boots.
How this works mm, we will need many less people. Matching the Earth’s carrying capacity is the smart money. This is part of the transition.
Babtized on Tue, 3rd Apr 2018 1:27 am
Maybe be a late April fools joke? But MSN had an article claiming West Texas is sinking, where there is fracking occurring?
rockman on Tue, 3rd Apr 2018 8:35 am
Chico – “…an overly aggressive addition of equipment and personnel in the fourth quarter of 2017”. Why do you think that? The yards are still full of mothballed equipment. Any uptick in activity and there’s no need to BUILD new equipment: just pull “off the shelf” what’s already there.
As for as personnel no company pays hands to sit at home while waiting for the next job to come up. The Rockman has a half dozen consultants ready to roll if I call. And they are not getting paid a penny to be on standby. They are just happy to be on my call list.
Cloggie on Tue, 3rd Apr 2018 3:15 pm
Europeans helping Americans getting started with offshore wind farming:
https://cleantechnica.com/2018/04/03/orsted-eversource-announce-200-megawatt-connecticut-offshore-wind-farm/
Cloggie on Tue, 3rd Apr 2018 3:18 pm
Renewable energy works. UK reports lowest emissions since… 1890!
https://cleantechnica.com/2018/04/03/uk-government-confirms-historic-low-emissions-as-wind-solar-become-second-biggest-electricity-source/
Cloggie on Tue, 3rd Apr 2018 3:20 pm
Vestas of Denmark scores 4 North-American orders to the tune of 600 MW:
https://cleantechnica.com/2018/04/02/vestas-receives-confirms-598-megawatts-of-end-of-quarter-turbine-orders/
Cloggie on Tue, 3rd Apr 2018 3:31 pm
German offshore wind foundation manufacturer EEW to set up shop in Massachusets:
https://www.offshorewind.biz/2018/04/03/offshore-wind-foundations-specialist-plants-us-roots/
https://de.wikipedia.org/wiki/Erndtebrücker_Eisenwerk
MASTERMIND on Tue, 3rd Apr 2018 3:38 pm
New Jersey cops search a man’s anus, genitals for weed during traffic stop. See for yourself.
https://www.app.com/story/news/2018/04/03/new-jersey-cops-search-mans-anus-and-genitals-weed-during-traffic-stop/480921002/
This is what mad kat talks about when he says we live in a Police State..We are obviously under a soft martial law right now..
peakyeast on Tue, 3rd Apr 2018 7:15 pm
Some drugs probably should be legalized all over. We have so many people in the world. Heroin and hashish is cheap in resources and makes the people using them use much less resources. Lying on a mattress or stoning in front of the TV seems like a good way to get rid of consumption and people. Its slow, but at least it people chose it themselves and are happy about their choice.
War and famine are not better solutions although we seem to favour those.