Key themes of the Big 3 oilfield service companies

Part 3
Key themes of the Big 3 oilfield service companies (Part 3 of 8)

Why experts say the North American fracking market is improving

Baker Hughes comments on NA pressure pumping

Baker Hughes (BHI) stated on its 3Q13 earnings call that it believed that the North American pressure pumping market was still roughly 20% oversupplied. However, despite weakness, the NA pressure pumping market was on the path to recovery, with this being the third straight quarter in which BHI saw improvement in the business line. The company noted that the margins for its NA pressure pumping service line were still far below its overall results, though the situation was “getting better”. The company also noted that efficiency gains were slowing the pace at which overcapacity was absorbing, and that it expected overcapacity would persist into 2014.

BHI - NA 3Q13 ResultsEnlarge Graph

Schlumberger comments on NA pressure pumping

Schlumberger commented that in its North American operations (including its pressure pumping line), it was still experiencing downward pricing pressure, although at a slower rate than previously. Plus, SLB noted that though pricing was still going down, there was potential for it to realize some margin improvements from new technology and operational efficiency.

Schlumberger also mentioned that it saw the opportunity to reduce costs with a new fracking technology it rolled out called HiWAY, which could help margins.

Halliburton comments on NA pressure pumping

Halliburton commented that excess supply of pressure pumping in North America continued to affect pricing. The company noted that the situation was improving, though it believed the pricing pressure would continue as contracts renewed over the next quarter. HAL also noted that the trend of an increase in wells drilled per rig as well as greater service intensity (in lay terms, more intense fracking) would help to balance the pressure pumping market.

Overall outlook on pressure pumping

Generally, the North American pressure pumping market is expected to have oversupply until late 2014 or 2015. Until then, pricing is expected to remain weak. Plus, efficiencies are working to slow down the absorption of the capacity to some degree. However, most companies characterized the situation as beginning to improve.

The Realist Discussions