Like in Steinbeck’s “Grapes of Wrath”, Halliburton’s version of the Joad family has tied everything they own to the top of a pump truck and driven off, leaving their Oklahoma farm and its economic disaster far behind.

HAL still has its manufacturing center and a service yard in Duncan, Oklahoma, plus several other service lines here and there, but the super camp in El Reno where more than 1000 people had been working (or was it 2000?) saw the last 808 ushered out the door on 2 December 2019. Oklahoma was Ground Zero for Earl P Halliburton’s launch 100 years ago, but closing their market-dominating showpiece service center is an unexpected way to celebrate their Centennial.

Our research with our sister company, Oilfield Logix, suggests that the El Reno facility represented $25M per month – $300M in annual revenue! – to HAL’s top line this year. The total MidContinent oilfield equipment and service market will be about $10B in 2019, of which about $3B was the addressable market served by HAL out of that facility. $2B of that $3B is hydraulic fracturing.

For some oil companies this is gonna sting like ripping a Band-Aid off. The region’s number one supplier is now a hundred miles or more further away. Continental Resources, for example, has been a big supporter of HAL’s cementing and fracturing in Oklahoma.

What caused this closure? During 2019/2020 every district, every truck, every rig, every employee MUST make the company money or the ruthless chainsaw of cost cutting will swoop in. Halliburton, with its fantastic balance sheet, is not immune, because 2020 will be worse than 2019 in the US. The goodwill you generate from sticking around during a slow time has zero value in today’s new Green world.

What else caused this closure? Alta Mesa was a big user of Halliburton’s services. Alta Mesa declared bankruptcy a couple months ago in what the Wall Street Journal reported as, “…a free-fall bankruptcy.” Which other oil companies in the region are on shaky financial footing?

And what else caused this closure? The SCOOP/STACK isn’t measuring up to investor expectations, so drilling rig count has fallen in half while rig counts everywhere else have fallen less dramatically.

So let’s review: Oklahoma is a region with collapsing activity, customers will have a hard time paying in an environment where every activity must make money, and the future points to worse, not better. I’d pull the plug on El Reno too. Sorry, Earl P.

HAL will make the best of it, committing to LONG drives from distant camps to service its better customers, but this will open up $0.3B worth of opportunities for HAL’s competitors who might just pick up a little work in the vacuum HAL leaves behind.