American Oil and Gas Reporter - September 2020 - 38

pages 36-39_Layout 1 9/21/2020 1:33 PM Page 38

WellFracturing: Market Dynamics
FIGURE 2
Rolling Three-Month U.S. Frac Spread Counts
160
140

Frac Spreads

120
100
78

80
69
60

70

58

80

74
64

67

76

80
70

85

87

85

89

70

40

Ju
ne
5
Ju
ne
12
Ju
ne
19
Ju
ne
26
Ju
ly
2
Ju
ly
10
Ju
ly
17
Ju
ly
24
Ju
ly
31
Au
g
7
Au
g
14
Au
g
21
Au
g
28
Se
pt
4
Se
pt
11
Se
pt
18

20

Gulf, and Uinta-Piceance basins. Texas
will see the most activity return due to
its proximity to refining assets as well as
export facilities, but stability in these
other areas will remain driven by proximity
to refining/petrochemical facilities, crude
quality, and natural gas demand.
During the week ending Sept. 18, the
U.S. market achieved completion activity
of 89 spreads after resilience. That was
the highest active count since April when
the COVID lockdown measures were put
in place, but the road to 100 is a long one
at the current strip and demand profile.
In order to get back to 150 spreads, there
will need to be a marked shift in realized
prices in 2021 that allows producers to
finance more activity. The other key unknown will be on the political front, with
a presidential election around the corner
and a murky Democratic energy backdrop
as it relates to fracturing and shale activity.
Until some of these policies and events
are clarified, operators will be hesitant to
deploy additional capital across basins
beyond maintenance mode.
That said, there remains some running
room in the completions world as additional efficiencies are gained with 24/7
spreads, dual-fuel fleets, further e-frac
deployments, and other cost-cutting measures to maximize returns.
The Other Supply Problem
The slow return of completion crews
is putting more equipment on the sidelines
38 THE AMERICAN OIL & GAS REPORTER

and taking a large human toll with significant layoffs across the sector. On the
oil field services side, some workers have
experienced multiple layoffs over the last
four- or five-year boom and bust cycles
and may be reluctant to return to work in
the frac business. When equipment is
idled, there are many steps that go into
caring for the assets, from properly flushing to avoid rust and rot to rotating tires
and ensuring properly wrapped and lubricated pieces of equipment. The computers and other weather-sensitive components can be removed and stored in a
more controlled setting to avoid water/humidity damage.
As the market inevitably recovers,
we are going to be faced with a different
problem: supply. How much of the
equipment was stripped down to keep
other spreads operational? How much
inventory is left to replace damaged or
rotted parts of cold-stacked equipment?
Can a fleet operator even hire enough
hands to come back, or will it take
longer and higher pay? In order to
protect pricing, companies may utilize
idled pieces of equipment-everything
from a fluid end to a transmission-to
keep a spread active in the field. The
longer the spreads sit in the yard, the
more they will also be subject to Mother
Nature and the damage she brings.
If we get a controlled COVID-19 environment and rising crude prices in
2021, oil and gas companies are expecting

to see a return to activity, but with a
supply crunch, pricing will start to return.
The move from 45 to 85 spreads saw 40
spreads come off the sidelines that were
probably either left on the job (a quick
return was expected) or were temporarily
shuttered in the yard with the "A crew"
kept on furlough to ensure rapid deployment. We expect another 100 spreads
to be capable of reliable activation, but
will the workers be around after an 18month hiatus?
Once we get beyond 185 spreads, we
start to question the functionality of what
remains because of supplies being stripped
or not having the proper parts in inventory.
This leads to a bigger supply chain problem: Will inventories be well stocked
with replacements, or have assembly lines
been cut and inventories sold off?
The Way Forward
Looking ahead to 2021, the supply
question will be interesting. Will pricing
power be delivered back to the oil field
service companies? They will require
term contracts, price increases and longer
lead times to activate new spreads, so
these issues will need to be addressed
sooner rather than later. Consolidations
will continue to take place-with the most
recent being Liberty Oilfield Services
and Schlumberger-as all parts of the hydrocarbon value chain either enter bankruptcy to adjust debt loads, sell equipment
or acreage, merge or sell themselves.
The Liberty Oilfield Services and
Schlumberger deal is a case study in the
thought processes happening in the market.
Liberty thought enough of Schlumberger's
entire frac supply to exchange 37% equity
for its leverage. We believe this effectively
puts Liberty in the No. 2 spot behind
Halliburton in number of marketed spreads
in North America. Liberty also now has
an improved logistics plan in the Permian,
access to Schlumberger's deep technology,
and quality equipment to compete for
market share.
What motivated Schlumberger to enter
into the deal? Quite frankly, the world is
oversupplied with oil and the markets
that offer the best margins right now for



American Oil and Gas Reporter - September 2020

Table of Contents for the Digital Edition of American Oil and Gas Reporter - September 2020

Contents
American Oil and Gas Reporter - September 2020 - Intro
American Oil and Gas Reporter - September 2020 - 1
American Oil and Gas Reporter - September 2020 - 2
American Oil and Gas Reporter - September 2020 - 3
American Oil and Gas Reporter - September 2020 - 4
American Oil and Gas Reporter - September 2020 - Contents
American Oil and Gas Reporter - September 2020 - 6
American Oil and Gas Reporter - September 2020 - 7
American Oil and Gas Reporter - September 2020 - 8
American Oil and Gas Reporter - September 2020 - 9
American Oil and Gas Reporter - September 2020 - 10
American Oil and Gas Reporter - September 2020 - 11
American Oil and Gas Reporter - September 2020 - 12
American Oil and Gas Reporter - September 2020 - 13
American Oil and Gas Reporter - September 2020 - 14
American Oil and Gas Reporter - September 2020 - 15
American Oil and Gas Reporter - September 2020 - 16
American Oil and Gas Reporter - September 2020 - 17
American Oil and Gas Reporter - September 2020 - 18
American Oil and Gas Reporter - September 2020 - 19
American Oil and Gas Reporter - September 2020 - 20
American Oil and Gas Reporter - September 2020 - 21
American Oil and Gas Reporter - September 2020 - 22
American Oil and Gas Reporter - September 2020 - 23
American Oil and Gas Reporter - September 2020 - 24
American Oil and Gas Reporter - September 2020 - 25
American Oil and Gas Reporter - September 2020 - 26
American Oil and Gas Reporter - September 2020 - 27
American Oil and Gas Reporter - September 2020 - 28
American Oil and Gas Reporter - September 2020 - 29
American Oil and Gas Reporter - September 2020 - 30
American Oil and Gas Reporter - September 2020 - 31
American Oil and Gas Reporter - September 2020 - 32
American Oil and Gas Reporter - September 2020 - 33
American Oil and Gas Reporter - September 2020 - 34
American Oil and Gas Reporter - September 2020 - 35
American Oil and Gas Reporter - September 2020 - 36
American Oil and Gas Reporter - September 2020 - 37
American Oil and Gas Reporter - September 2020 - 38
American Oil and Gas Reporter - September 2020 - 39
American Oil and Gas Reporter - September 2020 - 40
American Oil and Gas Reporter - September 2020 - 41
American Oil and Gas Reporter - September 2020 - 42
American Oil and Gas Reporter - September 2020 - 43
American Oil and Gas Reporter - September 2020 - 44
American Oil and Gas Reporter - September 2020 - 45
American Oil and Gas Reporter - September 2020 - 46
American Oil and Gas Reporter - September 2020 - 47
American Oil and Gas Reporter - September 2020 - 48
American Oil and Gas Reporter - September 2020 - 49
American Oil and Gas Reporter - September 2020 - 50
American Oil and Gas Reporter - September 2020 - 51
American Oil and Gas Reporter - September 2020 - 52
American Oil and Gas Reporter - September 2020 - 53
American Oil and Gas Reporter - September 2020 - 54
American Oil and Gas Reporter - September 2020 - 55
American Oil and Gas Reporter - September 2020 - 56
American Oil and Gas Reporter - September 2020 - 57
American Oil and Gas Reporter - September 2020 - 58
American Oil and Gas Reporter - September 2020 - 59
American Oil and Gas Reporter - September 2020 - 60
American Oil and Gas Reporter - September 2020 - 61
American Oil and Gas Reporter - September 2020 - 62
American Oil and Gas Reporter - September 2020 - 63
American Oil and Gas Reporter - September 2020 - 64
American Oil and Gas Reporter - September 2020 - 65
American Oil and Gas Reporter - September 2020 - 66
American Oil and Gas Reporter - September 2020 - 67
American Oil and Gas Reporter - September 2020 - 68
American Oil and Gas Reporter - September 2020 - 69
American Oil and Gas Reporter - September 2020 - 70
American Oil and Gas Reporter - September 2020 - 71
American Oil and Gas Reporter - September 2020 - 72
American Oil and Gas Reporter - September 2020 - 73
American Oil and Gas Reporter - September 2020 - 74
American Oil and Gas Reporter - September 2020 - 75
American Oil and Gas Reporter - September 2020 - 76
American Oil and Gas Reporter - September 2020 - 77
American Oil and Gas Reporter - September 2020 - 78
American Oil and Gas Reporter - September 2020 - 79
American Oil and Gas Reporter - September 2020 - 80
American Oil and Gas Reporter - September 2020 - 81
American Oil and Gas Reporter - September 2020 - 82
American Oil and Gas Reporter - September 2020 - 83
American Oil and Gas Reporter - September 2020 - 84
American Oil and Gas Reporter - September 2020 - 85
American Oil and Gas Reporter - September 2020 - 86
American Oil and Gas Reporter - September 2020 - 87
American Oil and Gas Reporter - September 2020 - 88
American Oil and Gas Reporter - September 2020 - 89
American Oil and Gas Reporter - September 2020 - 90
American Oil and Gas Reporter - September 2020 - 91
American Oil and Gas Reporter - September 2020 - 92
American Oil and Gas Reporter - September 2020 - 93
American Oil and Gas Reporter - September 2020 - 94
American Oil and Gas Reporter - September 2020 - 95
American Oil and Gas Reporter - September 2020 - 96
American Oil and Gas Reporter - September 2020 - 97
American Oil and Gas Reporter - September 2020 - 98
American Oil and Gas Reporter - September 2020 - 99
American Oil and Gas Reporter - September 2020 - 100
American Oil and Gas Reporter - September 2020 - 101
American Oil and Gas Reporter - September 2020 - 102
American Oil and Gas Reporter - September 2020 - 103
American Oil and Gas Reporter - September 2020 - 104
American Oil and Gas Reporter - September 2020 - 105
American Oil and Gas Reporter - September 2020 - 106
American Oil and Gas Reporter - September 2020 - 107
American Oil and Gas Reporter - September 2020 - 108
https://www.nxtbook.com/nxtbooks/aogr/202009
https://www.nxtbook.com/nxtbooks/aogr/202008
https://www.nxtbook.com/nxtbooks/aogr/202007
https://www.nxtbook.com/nxtbooks/aogr/202006
https://www.nxtbook.com/nxtbooks/aogr/202005
https://www.nxtbook.com/nxtbooks/aogr/202004
https://www.nxtbook.com/nxtbooks/aogr/202003
https://www.nxtbook.com/nxtbooks/aogr/202002
https://www.nxtbook.com/nxtbooks/aogr/202001
https://www.nxtbook.com/nxtbooks/aogr/201912
https://www.nxtbook.com/nxtbooks/aogr/201911
https://www.nxtbook.com/nxtbooks/aogr/201910
https://www.nxtbook.com/nxtbooks/aogr/201909
https://www.nxtbook.com/nxtbooks/aogr/201908
https://www.nxtbook.com/nxtbooks/aogr/201907
https://www.nxtbook.com/nxtbooks/aogr/201906
https://www.nxtbook.com/nxtbooks/aogr/201905
https://www.nxtbook.com/nxtbooks/aogr/201904
https://www.nxtbook.com/nxtbooks/aogr/201903
https://www.nxtbook.com/nxtbooks/aogr/201902
https://www.nxtbook.com/nxtbooks/aogr/201901
https://www.nxtbook.com/nxtbooks/aogr/201812
https://www.nxtbook.com/nxtbooks/aogr/201811
https://www.nxtbook.com/nxtbooks/aogr/201810
https://www.nxtbook.com/nxtbooks/aogr/pbios_201810
https://www.nxtbook.com/nxtbooks/aogr/201809
https://www.nxtbook.com/nxtbooks/aogr/201808
https://www.nxtbook.com/nxtbooks/aogr/201807
https://www.nxtbook.com/nxtbooks/aogr/201806
https://www.nxtbook.com/nxtbooks/aogr/201805
https://www.nxtbook.com/nxtbooks/aogr/201804
https://www.nxtbook.com/nxtbooks/aogr/201803
https://www.nxtbook.com/nxtbooks/aogr/201802
https://www.nxtbook.com/nxtbooks/aogr/201801
https://www.nxtbook.com/nxtbooks/aogr/201712
https://www.nxtbook.com/nxtbooks/aogr/201711
https://www.nxtbook.com/nxtbooks/aogr/201710
https://www.nxtbook.com/nxtbooks/aogr/201709
https://www.nxtbook.com/nxtbooks/aogr/201708
https://www.nxtbook.com/nxtbooks/aogr/201707
https://www.nxtbook.com/nxtbooks/aogr/201706
https://www.nxtbook.com/nxtbooks/aogr/201705
https://www.nxtbook.com/nxtbooks/aogr/201704
https://www.nxtbook.com/nxtbooks/aogr/201703
https://www.nxtbook.com/nxtbooks/aogr/201702
https://www.nxtbook.com/nxtbooks/aogr/201701
https://www.nxtbook.com/nxtbooks/aogr/201612
https://www.nxtbook.com/nxtbooks/aogr/201611
https://www.nxtbook.com/nxtbooks/aogr/201610
https://www.nxtbook.com/nxtbooks/aogr/pbios2016_programguide
https://www.nxtbook.com/nxtbooks/aogr/201609
https://www.nxtbook.com/nxtbooks/aogr/201608
https://www.nxtbook.com/nxtbooks/aogr/201607
https://www.nxtbook.com/nxtbooks/aogr/201606
https://www.nxtbook.com/nxtbooks/aogr/201605
https://www.nxtbook.com/nxtbooks/aogr/201604
https://www.nxtbook.com/nxtbooks/aogr/201603
https://www.nxtbook.com/nxtbooks/aogr/201602
https://www.nxtbook.com/nxtbooks/aogr/201601
https://www.nxtbook.com/nxtbooks/aogr/201512
https://www.nxtbook.com/nxtbooks/aogr/201511
https://www.nxtbook.com/nxtbooks/aogr/201510
https://www.nxtbook.com/nxtbooks/aogr/201509
https://www.nxtbook.com/nxtbooks/aogr/201508
https://www.nxtbook.com/nxtbooks/aogr/201507
https://www.nxtbook.com/nxtbooks/aogr/201506
https://www.nxtbook.com/nxtbooks/aogr/201505
https://www.nxtbook.com/nxtbooks/aogr/201504
https://www.nxtbook.com/nxtbooks/aogr/201503
https://www.nxtbook.com/nxtbooks/aogr/201502
https://www.nxtbook.com/nxtbooks/aogr/201501
https://www.nxtbook.com/nxtbooks/aogr/201412
https://www.nxtbook.com/nxtbooks/aogr/201411
https://www.nxtbook.com/nxtbooks/aogr/201410
https://www.nxtbook.com/nxtbooks/aogr/201409
https://www.nxtbook.com/nxtbooks/aogr/pbios2014_programguide
https://www.nxtbook.com/nxtbooks/aogr/201408
https://www.nxtbook.com/nxtbooks/aogr/201407
https://www.nxtbook.com/nxtbooks/aogr/201406
https://www.nxtbook.com/nxtbooks/aogr/201405
https://www.nxtbook.com/nxtbooks/aogr/201404
https://www.nxtbook.com/nxtbooks/aogr/201403
https://www.nxtbook.com/nxtbooks/aogr/201402
https://www.nxtbook.com/nxtbooks/aogr/201401
https://www.nxtbook.com/nxtbooks/aogr/201312
https://www.nxtbook.com/nxtbooks/aogr/201311
https://www.nxtbook.com/nxtbooks/aogr/201310
https://www.nxtbook.com/nxtbooks/aogr/201309
https://www.nxtbook.com/nxtbooks/aogr/201308
https://www.nxtbook.com/nxtbooks/aogr/201307
https://www.nxtbook.com/nxtbooks/aogr/201306
https://www.nxtbook.com/nxtbooks/aogr/201305
https://www.nxtbook.com/nxtbooks/aogr/201304
https://www.nxtbook.com/nxtbooks/aogr/201303
https://www.nxtbook.com/nxtbooks/aogr/201302
https://www.nxtbook.com/nxtbooks/aogr/201301
https://www.nxtbook.com/nxtbooks/aogr/201212
https://www.nxtbook.com/nxtbooks/aogr/201211
https://www.nxtbook.com/nxtbooks/aogr/201210
https://www.nxtbook.com/nxtbooks/aogr/201209
https://www.nxtbook.com/nxtbooks/aogr/2012_pbios
https://www.nxtbook.com/nxtbooks/aogr/201208
https://www.nxtbook.com/nxtbooks/aogr/201207
https://www.nxtbook.com/nxtbooks/aogr/201206
https://www.nxtbook.com/nxtbooks/aogr/201205
https://www.nxtbook.com/nxtbooks/aogr/201204
https://www.nxtbook.com/nxtbooks/aogr/201203
https://www.nxtbook.com/nxtbooks/aogr/201202
https://www.nxtbook.com/nxtbooks/aogr/201201
https://www.nxtbook.com/nxtbooks/demo/aogr_clone
https://www.nxtbook.com/nxtbooks/aogr/201112
https://www.nxtbookmedia.com