Drilling activity in the U.S. shale patch is about to rebound later this year and next year as oil prices have strengthened recently, American oilfield services firms said this week.
The U.S. rig count, which has been falling this year, is near its bottom, according to executives at drilling and fracking firms who expect demand for their services to improve in the latter part of this year and in 2024.
Drilling services providers Helmerich & Payne, Patterson-UTI Energy, and NexTier Oilfield Solutions all signaled expectations of a recovery of demand for their services, commenting on their second-quarter performance.
Last week, two of the world’s top three oilfield service providers, Halliburton and Baker Hughes, reported consensus-beating profits for the second quarter, but both signaled softer demand for drilling on the North American market.
“Market softness in North America is expected to be more than offset by strength in international and offshore markets,” said Lorenzo Simonelli, Baker Hughes chairman and chief executive officer.
Lower oil and natural gas prices and higher uncertainty about demand this year amid signs of weakening economies have made U.S. oil and gas producers cautious about their drilling plans so far this year. Activity was unchanged in the second quarter, while oil and natural gas production increased at a slower pace compared with the prior quarter, according to executives responding to the latest quarterly Dallas Fed Energy Survey in June.
The rig count across the U.S. has also been falling this year. In the week to July 21, the total rig count fell by 6 to 669 rigs, per data from Baker Hughes. So far this year, Baker Hughes has estimated a loss of more than 100 active drilling rigs. Last week’s count was also 406 fewer rigs than the rig count at the beginning of 2019, prior to the pandemic.
But oilfield services providers Helmerich & Payne, Patterson-UTI Energy, and NexTier Oilfield Solutions expect drilling activity to recover later this year and in 2024 from this year’s lows. Related: Exxon Misses Earnings Estimate With 56% Profit Decline
“Uncertainty around the macro-outlook for crude oil and natural gas prices maintained an underlying sense of apprehension in the U.S. drilling market during the quarter,” Helmerich & Payne president and CEO John Lindsay said this week, commenting on the Q2 results.
“Recently however, some of this uncertainty has receded, and we are starting to see signs of optimism on the horizon.”
“For the quarter ending in December, we expect to see an increase in contracting activity as our customers refresh their capital budgets for 2024, and we have already received indications they may increase activity,” Lindsay said, adding that Helmerich & Payne expects higher demand for rigs in the medium to longer term.
Andy Hendricks, chief executive at Patterson-UTI Energy, is also optimistic that drilling activity will rebound soon.
“With the recent strength in oil prices, along with natural gas futures prices in contango, we believe the industry rig count is near a bottom and both rig count and frac activity will improve later in the year and in 2024,” Hendricks said in the Q2 results release.
“We are constructive on the overall U.S. onshore market. With current commodity prices, operators should see significant improvement in their well economics.”
NexTier Oilfield Solutions, which is currently in the process of merging with Patterson-UTI Energy, is upbeat on the U.S. land drilling market, too.
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Robert Drummond, NexTier’s president and chief executive officer, said,
“We believe the current market slowdown is transitory, and by early 2024 we think demand for our services will need to increase as higher drilling and completion activity will be needed for US land production to help fill growing global oil and natural gas demand.”
By Tsvetana Paraskova for Oilprice.com
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