US Pressure Pumping Capacity Will Exceed Demand by Nearly 1.8 Million Horsepower by the End of 2012, Says Report from PacWest Consulting Partners

HOUSTON, May 31, 2012 /PRNewswire/ -- PacWest Consulting Partners has just published the latest release of its PumpingIQ report, which monitors hydraulic fracturing capacity in the US.  PacWest analysis reveals that aggregate US pressure pumping supply exceeded demand late in the fourth quarter of 2011. PacWest estimates that US pressure pumping capacity utilization in the first quarter of 2012 averaged 93.4%.

"This is a major shift for the US pressure pumping market, which had been severely undersupplied for two years.  Prices broadly reflect the new market dynamic, with prices falling in all but a few oily plays in the first quarter of 2012," says Christopher Robart, a Principal with PacWest.  Additionally, he notes that, "Recent reports from on-the-ground sources indicate that the Permian basin is the only play where pressure pumping prices are still increasing at this time, but those increases are very moderate."

Based on the analysis, PacWest forecasts that hydraulic fracturing capacity utilization will bottom out at 87% in the second quarter of 2012 before rising to 89% in the fourth quarter of 2012, due to an increase in aggregate US rig count.

The supply of hydraulic fracturing capacity has lagged behind demand for the last two years, but PacWest expects capacity to increase by 16.5% over 2012 to 15.5 million HHP (510 fracturing fleets) at year-end.  At the end of 2012 Q1, PacWest estimates that there were 483 fracturing fleets and 14.4 million HHP of capacity operating in the US.

PacWest will host a conference call on June 14 at 10:30 AM CDT to brief its customers and all other interested parties on its view of the market. Call details are provided below.

Pressure Pumping Market Trends

Due to the depressed price of natural gas since 2009, E&Ps have aggressively shifted development spend from gas to oil/liquids plays, with pressure pumpers following.  PacWest expects hydraulic fracturing capacity to decrease by 22%, or 1.1 million HHP, in gas plays between the third quarter of 2011 and the end of 2012, while it expects hydraulic fracturing capacity to increase by 52%, or 3.3 million HHP, over the same time period in oil/liquids plays.

The migration in development activity from gas to oil/liquids plays caused temporary oversupply in gas plays and temporary undersupply in oil/liquids, although much of the supply/demand imbalance has been mitigated by now.  Many hydraulic fracturing fleets that were based in gas plays are temporarily undeployed or idled until new customers can be located.  PacWest estimates that as much as 1.1 million HHP of frac capacity was idle / undeployed at the end of the first quarter of 2012, but forecasts that figure will decrease to 0.7 million HHP by end-of-year.

Decreased capacity utilization rates are driving down prices for fracturing services across the US.  Prices in key gas plays have been falling for the last year but it was not until the last 6 months that prices started falling in oil/liquids plays.  Prices in the Eagle Ford started falling in the first quarter of 2012 and prices have even begun to soften in the Bakken.  The Permian basin is the only region where prices are still increasing, although price increases have moderated over the last six months.

Supply chain constraints that have held back the pressure pumping market for the last year have moderated significantly over the last six months.  Frac sand and proppant supply is now largely available, although transportation/logistics continues to cause intermittent problems.  A general lack of experienced oilfield labor continues to pose problems, particularly in the Bakken and Permian basin.  Guar gum prices have skyrocketed over the last year, primarily due to high oilfield demand.  Based on recent work in India to assess the guar supply market, PacWest estimates that there is a high probability of intermittent guar shortages over the next six months.

Conference Call Details

PacWest will be hosting an open call on June 14 at 10:30 AM CDT.  Details are as follows:

Conference Call
Dial-in: +1 800 830 3581
Code: 2922791

WebEx Presentation
https://meetingvisuals.webex.com/meetingvisuals/j.php?ED=195296192&UID=1434711462&RT=MiMxMQ%3D%3D

About PacWest

PacWest Consulting Partners is a boutique strategy consultancy and market intelligence firm that specializes in the energy, industrial, and resources sectors.  Much of its work is focused around the oilfield and the many industries that supply critical products and services to it.  With the explosion of unconventional resources in North America, the energy landscape is changing quickly and PacWest is at the forefront of that change, helping companies better understand the market and develop and implement new strategies to position themselves for growth.

PumpingIQ is the only market research product that provides a bottom-up view of the US pressure pumping market with granular counts of frac fleets and capacity, demand estimates, capacity utilization forecasts, and pricing forecasts.  It also highlights major market trends for each play in real-time, gathered from on-the-ground field staff in each play.

In addition to PumpingIQ, PacWest also recently launched FracDB, a unique proprietary database of frac activity that includes over 17,000 fracs executed in the US in 2011 and 2012.  It contains detailed operational and chemical data for each frac and continues to grow, with over 500 new fracs added weekly.  The product allows for granular analysis of pumper market share, oilfield chemical market share and supply chains, as well as completion and production forecasts and frac design optimization.

CONTACT: Chris Robart, +1-202-352-7805, [email protected]

SOURCE PacWest Consulting Partners