As I type this, three US frac service companies have announced the retirement and destruction of 1 million HHP by year’s end. The three companies are RES/Cudd, FTSI, and Patterson Energy Services/Universal. Here’s what we think is happening:

Those three companies had 1.7M HHP running in 2010. It appears that Cudd and PTEN are retiring ALL the trucks they had running in 2010, and FTSI is retiring about a third of the trucks they had in 2010. Said another way, these three combined are retiring 50-60% of the trucks they had working in 2010.

This suggests that the economic life of a hard working frac truck – from new build through rebuild through rebuild again – is about 10 years. There are, of course, thousands of exceptions to my new rule, but a 10-year life feels about right.

If that is true, how much horsepower was available in 2010? 9.7 million, according to us. That is for all of North America, because all these trucks have wheels and the border is fairly porous.

And if these three companies – all of good repute – are retiring over 50% of their 2010 fleets today, that suggests that the industry as a whole might be sending 9.7 million x 55%, or 5.3 million HHP to the scrap heap over the next few months.

Our firm has been counting North America’s frac HHP since 2002. We helped Weatherford get into the frac market back then, and it was important to get our arms around the fleet, 80% of which was HAL, SLB and BJS. Since then we’ve kept an eye on the “active” fleet, the “repaired” fleet, and the “out of service” fleet each year.

Here’s what we’ve noticed for the last several years: Ever since 2016, 5.0-5.5 million HHP just sits idle out by the fence. It hasn’t come back to work, and now we believe it can’t come back to work. It is this 5.5M HHP that is being cut up, destroyed, buried, driven off a cliff.

We think you will say goodbye to perhaps 5 million HHP over the next few months.

You may ask yourself, “What will this do to utilization?”, because THAT has a big impact on the price of a frac job.

Consider this: 2014 was the last time that zero horsepower was parked idle by the fence. All frac horsepower was either in the field working or back in the shop being worked on. Frac prices went to the moon in 2014, especially for those oil companies who only needed a couple wells frac’d. That was a profitable year for frac service companies and everybody associated with them. After the industry removes 5M HHP from the fleet over the next few months, zero horsepower will be parked idle by the fence once frac demand ticks slightly upward.

Parting is such sweet sorrow… (Romeo And Juliet Act 2, scene 2)

WARNING: Oil companies budgeting today’s price of a frac job into their 2020 AFEs might want to reconsider.