In 2017 we have 22 million HHP and just about 200 million feet of laterals, for a ratio of 0.11 HHP/FT.
Here’s what we find in this chart: When the industry is healthiest, which means that the fleet is about the right size (not too big, not too small, with customers served well), the ratio is about 0.10-0.12 HHP per lateral foot of hole drilled. This was the period 2011 through 2013. In 2014, the industry had too little HHP (0.09 HHP/FT) and in 2015 and 2016 too much (0.20 HHP/FT).
In 2017, 0.11 HHP/FT is right in the fairway. Frac prices are rising, so the fleet is expanding and customers are being served, albeit somewhat more expensively.
If drilling in 2018 rises a bit more (with oil prices at $47 it won’t rise much), the industry can absorb another 1 million HHP, but not 2 million more -- that would swamp the fleet and collapse pricing.
Finally, something to consider about Hurricane Harvey: If 10% of the frac fleet was hit by the hurricane and its flooding, and if 25% of that 10% hit was underwater, that’s 500,000 HHP eliminated from the frac fleet overnight. That dent may be enough to throw the frac industry out of balance, sending prices higher overnight, assuming drilling stays steady.
We don’t think it was that bad, but nobody drove their frac trucks to higher ground last week.