The oilfield focuses on two activity metrics in North America: Drilling Rigs and Frac Spreads. Neither are perfectly knowable, but both are like barometers – they tell you helpful information about the environment you are operating in.
Consider the following graph. This is our current estimate of North American frac stages pumped during the quarters Q4 2019 through Q3 2020:
We see that Q1 was a pretty good quarter, and, if the last half of March hadn’t happened, the quarter could have been one of the best quarters of the last 12 months. Q2 is half of Q1 (fastest decline ever), and Q3 should be down another 30%. In just a few months the pace of frac work will have fallen by two-thirds.
Here’s a partial list of related oilfield products and services that are falling by two-thirds as a result:
Frac Revenues
Proppant Sales
Water Services
Friction Reducers, Biocides, Surfactants, Crosslinkers, Breakers
Diesel Fuel Purchases
Cased Hole plug & perf services
Crane Rentals
Frac Stack Rentals & Repairs
High Pressure Treating Iron certification
Fluid end repair & replacement
Light Tower Rentals
Company Consultants
Trucking
Fluid/Chemistry QA/QC lab services
Proppant Storage facilities
Sand Mining
Transload Provisioning
On-site Security Services
Composite Frac Plug sales
Frac Flow-back Services
Coiled Tubing Services
Completion Rig Services
Production Tubing Sales
Artificial Lift Sales
Compression Rental
Diesel Engine Repair & Maintenance
Production Tree sales & installation
Field Production Equipment sales & installation
Food & Accommodations
Site Preparation
Frac Plug drill bit sales
Through Tubing well completion services
Production Packer sales & installation
Sales & Back-Office Support Services
Procurement Teams
HR…
Spears & Associates tries to take the pulse of all three-dozen of these frac-related products and services, plus 100 more across the industry and around the world. We talk with people throughout the year in each of these categories; and even if we don’t try to measure on-site security, site preparation, or diesel engine repair, the people in each of these categories will give us clues about the industry, about trends, about technologies, about pricing, about capacity.
Guess who will see the next new well completion uptick first?
Site prep and water. By the time you count active frac trucks the move has already happened.
PS. Our hometown of Tulsa has 5 major hospitals for a region that serves about 1 million people: St John, St Francis, Hillcrest, OSU, St. Francis South. One big one, St John, has 700 beds, of which 300 have patients. 10 of those are COVID patients. The other hospitals are similarly empty. In this case, no activity is a good thing, and the numbers are an early sign that the quarantine will soon begin to end.