“There is something in the New York air that makes sleep useless.” - Simone Beauvoir.

Our team has spent much of this week in New York City. As a firm we’ve had work in this town for decades, and we’re here to see clients, wannabe clients, should-have-been clients, and eventually-will-be clients. Meetings this week have revolved around our new research and some of the trends we’re seeing in the oilfield equipment and service arena. Also questions. Lots of questions.  We’ll let you in on some of the most frequent questions from gazillion dollar investors, and how we’re answering them:

What’s going on in frac?

Can’t drill a well in the US and not frac it if you want oil or gas to come out. At $60, the frac market grows 20% year over year in 2018. At $70, 35%.

Is the frac industry going to overbuild the fleet (like it always does in an upcycle)?

5M new HHP (hydraulic horsepower) is our 2018 estimate. Half adds to the fleet, half replaces the fleet. Old HHP never goes away, but it moves from being
a starter in the pitching rotation to a closer when the starters get hurt.

What do you think about Weatherford?

A year ago, WFT was $6.50 a share. Today? $2.50. One problem is, WFT needs international drilling to pick up so tubular services, completion, and rental will grow. None of its markets are healthy.

What do you know about Cactus Wellhead?

The Bender family and friends know how to run a Christmas tree company. The company has some interesting IP, but what they really have are good people.

How should I be thinking about the land contract drillers?

There are idle land drilling rigs from here to the horizon, yet all the high spec rigs are fully employed in the US. If the high end of the rig market is to expand, new rigs must be built. Oh, plus automation.

Is there an easy way to segment the water industry in the oilfield?

Lots of water deals have been announced, along with the refocusing on water by TTI. Can’t drill or complete or produce a well without water, but it sure is a fragmented market.

What do you hear about the Prairie Chicken and the Mussel out in West Texas?

I can never figure out why the Prairie Chicken, a lizard, a mussel, an insect can all be harmed by a hole in the ground or a sand pit, but not by 35 miles of wind farms towering hundreds of feet in the air.

How should I compare sand in a box with sand in a silo?

By our way of thinking, silos are better than mountain movers, sand in a box is better than silos. These days it is all about efficiency of logistics and sand in a box is amazingly efficient.

So, is the artificial lift market structurally gone forever?  What will it take for lift to ever grow again?

By now in an upcycle, the lift market should have had one big growth year and be starting a second big growth year. Instead, lift is just as flat as when oil was $26. US E&P has structurally changed.

Will the rental market come back?  It looks flat on its back today.

Even though the US drilling, completion and production market is heavily reliant on rental equipment, a big portion of the market is international, which is dead. This makes the broader market flat.

Your proppant demand number looks too high.  How can you get there?

We say 140-150M tons of sand demand in 2018 while others say 110M. Our number is US & Canada, the other guys just talk about US. When the others add Canada, we’re just 15% higher.

If the offshore market isn’t coming back in 2018, what do you think about 2019?  Too early?

Offshore projects are multiple billion dollar deals. When the forward curve for oil prices looks more like $50 than $60, what oil company board is going to hurry to approve a project in the next 2 years?

I just can’t get comfortable with the offshore drillers – so many rigs.  What is a better offshore sector?

If you don’t like offshore drillers, but you want to buy into the sector while everyone is running scared (i.e., buy low), look at subsea equipment. Highly disciplined players, and few of them to boot.

How does Liberty make so much more money per horsepower than Basic or Patterson?

Three ways: Liberty makes heavy use of sand delivered in boxes; Liberty has very high utilization of its entire fleet; and Liberty takes an engineered approach to fracturing services. Best in the industry.

When does frac lose pricing power?

In an upturn, oilfield prices begin to rise 6 months after drilling begins to rise.  Then prices rise for about 4 quarters. That’s when capital floods into the industry and builds capacity, which is happening now.

What is the most important service impacting well completion efficiency?

Cased hole wireline companies that are highly efficient are now able to command higher and higher “per run” prices. Wireline now holds the key to the number of stages pumped per day on a frac spread.

We could fill up every hour seeing investors in NYC, but we need sleep, which is the only thing this magnificent town lacks. Back to Tulsa, the Paris of Oklahoma.