Pricing down 35% in North American frac market; Slow recovery expected

We are pleased to announce we will be hosting a conference call on Thursday, June 25 at 9:30 am CST to discuss the outlook for the hydraulic fracturing market, based on our recently published PumpingIQ report, a service provided by IHS through its recent acquisition of PacWest.

The report provides details of a slow recovery forecast in the North American market for hydraulic fracturing services. Drilling and completion (D&C) activity in North America should find a bottom in 15Q3, before beginning a slow but steady improvement. Despite some recovery in oil prices in 15H1, rig count is less than half the level of 14Q4. Low utilization and falling prices are creating major challenges for frac companies.

Frac demand in the US Land market will fall by 35% in 2015 and the number of frac stages is expected to fall by 32% in 2015, compared to a 44% fall in rig count. North American frac capacity additions have been scaled back significantly from 6 months ago. While most capacity contracted for 15H1 delivery has been received, capacity slated for 15H2 delivery has largely been pushed back to 2016.

Frac pricing is expected to fall by 35% by year-end 2015 (compared with year-end 2014 pricing). The first major round of pricing concessions in 15Q1 sent frac pricing down 19%. A second round of concessions in 15Q2 has seen pricing drop another 12%, with incremental pricing reductions through 15H2 expected. Operators continue to report that unsolicited bids are common and many pumpers are engaging in aggressive price discounts to win work and position themselves for the eventual recovery. Unless the recovery in D&C activity ramps up more quickly than current forecasts, substantial recovery in frac pricing is not expected until early 2017.

For details on purchasing the IHS report, To Frac or Refrac, contact our team.

By Staff Writer June 23, 2015, PumpingIQ.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.