Halliburton Q1 updates reveal complexity of US frac market

By Luke Geiver | April 22, 2019

The hydraulic fracturing market across the North American shale scene is as complex as ever. Halliburton CEO Jeff Miller explained the changes, offerings and strategies the global energy service giant has been through in the past few years and the past few months in its 2019 Q1 investor update.

As operators across the U.S. shale basins look to do more with less, energy service firms are tasked with pumping more stages per day with sand that is harder on equipment. Energy production companies have been using cheaper, in-basin sand as a means to save on costs. Service prices paid to Halliburton in the back half of 2018 and early 2019 were borderline good enough to meet minimum thresholds, he said, noting that in some cases where the return on deploying equipment was not what Halliburton needed, the company simply stacked frack equipment.

Miller told investors during Halliburton’s Q1 2019 investor call that the company is now pushing 30 percent more sand through its equipment and placing 20 percent more stages per well than it did in 2016. According to Miller, the strain on U.S. fracking horsepower will require up to 8 million horsepower needing upgrades this year, but most energy service firms are not looking to add horsepower based on customer budgets and planning which show a lack of clarity and expansion efforts.

Despite the difficulty of navigating the early market conditions in December of last year and the early months of the current quarter, Miller said activity has ramped up and 2019 is now looking solid. The global oil market is secure and other variables are showing demand to be stable. “Customer activity in both hemispheres has picked up,” he said. “We believe the worst in pricing is behind us.”

Operators are refreshing their budgets as commodity prices change, Miller said noting a positive change in the previous weeks. As those budgets change, Halliburton will continue to examine its land fleet.

The company is continuing to invest in research and innovation because that is where operators are going. In combination with capital discipline, operators will need to get more production from shale wells. “It won’t be just about getting the most number of stages fracked today, but improving the quality of those stages and their production output will be just as important,” he said.

Halliburton recently deployed its Prodigy fracturing automation platform in the Williston Basin. The automated system helps provide the most efficient pumping rate of fluids to each individual fracture cluster to eliminate human error. In a Bakken well the system helped increase production and operational efficiency on a cluster by roughly 30 percent.

For the remainder of the year, most energy service firms will be focused on maintaining their fleets and equipment and working with operators as they refresh their budgets. Some are starting to look more into bundled services, a practice some producers moved away from in an effort to try an gain more control on sand or services pricing as they worked to lower all costs instead of focusing on overall production increases.

Overall, the 2019 year looks to be rebounding and stronger than the previous months had indicated.