A guy asked me the other day what I like to invest in. I told him, “companies that increase in value!” He pointed out that it is not possible to know this (clearly he had never met BitCoin) and, since it is not possible to know, what other guidelines do I have. I said, “Things that are consumed in the process of drilling, completing, and producing a well.” I sketched out the following list on a napkin of where to invest in the oilfield:

A guy asked me the other day what I like to invest in. I told him, “companies that increase in value!” He pointed out that it is not possible to know this (clearly he had never met BitCoin) and, since it is not possible to know, what other guidelines do I have. I said, “Things that are consumed in the process of drilling, completing, and producing a well.” I sketched out the following list on a napkin of where to invest in the oilfield:

 PDC Drill Bits:  The bits, the diamond inserts, the tungsten carbide inserts.  MWD & Downhole Motor Components:  Every hour an MWD or motor operates, it wears out parts…mule shoes, rotatable connectors, electronics, motor linings, bearing packs, collars.  Mud Pumps: In particular, the expendables inside the fluid end of the pump.  Top Drives: In particular, the repair and maintenance of top drives.  Cement: And cementing additives.  Casing Hardware: Centralizers, float shoes, inflatable packers.  Pipe: There has never yet been a well drilled without pipe.  

PDC Drill Bits:  The bits, the diamond inserts, the tungsten carbide inserts.

MWD & Downhole Motor Components:  Every hour an MWD or motor operates, it wears out parts…mule shoes, rotatable connectors, electronics, motor linings, bearing packs, collars.

Mud Pumps: In particular, the expendables inside the fluid end of the pump.

Top Drives: In particular, the repair and maintenance of top drives.

Cement: And cementing additives.

Casing Hardware: Centralizers, float shoes, inflatable packers.

Pipe: There has never yet been a well drilled without pipe.
 

 Sand: North America will pump over 100M tons of sand in frac jobs in 2017 at $50 per ton…$5B, and that doesn’t count the cost of moving the sand.  Chemicals: Friction reducers, surfactants, demulsifiers, cross linkers. But not guar… never bet on a commodity that ebbs and flows on both US drilling activity AND rainfall in Pakistan.  Perforating Systems: Somewhere around 30M shaped charges will be fired this year and hauled downhole in millions of tube carriers with detonator cords and switches.  Composite Bridge Plugs: Over 1M will be run in North America in 2017. Treating Iron: The granddaddy of them all, Chiksan, by FMC, but several alternatives exist today.

Sand: North America will pump over 100M tons of sand in frac jobs in 2017 at $50 per ton…$5B, and that doesn’t count the cost of moving the sand.

Chemicals: Friction reducers, surfactants, demulsifiers, cross linkers. But not guar… never bet on a commodity that ebbs and flows on both US drilling activity AND rainfall in Pakistan.

Perforating Systems: Somewhere around 30M shaped charges will be fired this year and hauled downhole in millions of tube carriers with detonator cords and switches.

Composite Bridge Plugs: Over 1M will be run in North America in 2017.
Treating Iron: The granddaddy of them all, Chiksan, by FMC, but several alternatives exist today.

 Sucker Rods: They wear out a little bit with each up and down cycle.  Production Chemicals: A few ounces in every barrel of water produced…and those barrels of water are going up just like barrels of oil.  One of the reasons why I like the cased hole wireline business is because my old friend Sandy Stark used to say, “I love blowin’ up my inventory.” Many Texas and New Mexico well pads now see the wireline company bring out 1000 perforating guns for all the frac stages they’ll be working on. And if the jobs go as planned, none of those guns will be returned to inventory back at the yard. High demand, at every jobsite.   This means I generally steer away from big capital equipment operated by lots of field people performing an undifferentiated service offering. THAT I leave to your imagination.

Sucker Rods: They wear out a little bit with each up and down cycle.

Production Chemicals: A few ounces in every barrel of water produced…and those barrels of water are going up just like barrels of oil.

One of the reasons why I like the cased hole wireline business is because my old friend Sandy Stark used to say, “I love blowin’ up my inventory.” Many Texas and New Mexico well pads now see the wireline company bring out 1000 perforating guns for all the frac stages they’ll be working on. And if the jobs go as planned, none of those guns will be returned to inventory back at the yard. High demand, at every jobsite. 

This means I generally steer away from big capital equipment operated by lots of field people performing an undifferentiated service offering. THAT I leave to your imagination.