• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 7 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 4 days Does Toyota Know Something That We Don’t?
  • 7 days OPINION: Putin’s Genocidal Myth A scholarly treatise on the thousands of years of Ukrainian history. RCW
  • 4 days World could get rid of Putin and Russia but nobody is bold enough
  • 3 days America should go after China but it should be done in a wise way.
  • 7 days CHINA Economy IMPLODING - Fastest Price Fall in 14 Years & Stock Market Crashes to 5 Year Low
  • 6 days China is using Chinese Names of Cities on their Border with Russia.
  • 7 days Russian Officials Voice Concerns About Chinese-Funded Rail Line
  • 6 days CHINA Economy Disaster - Employee Shortages, Retirement Age, Birth Rate & Ageing Population
  • 7 days Putin and Xi Bet on the Global South
  • 7 days "(Another) Putin Critic 'Falls' Out Of Window, Dies"
  • 8 days United States LNG Exports Reach Third Place
  • 8 days Biden's $2 trillion Plan for Insfrastructure and Jobs

Payback Time: Oilfield Services Raise Prices

Oilfield service providers are upping their prices, the latest Dallas Fed Energy Survey has found, confirming what producers began to complain about last year when oil prices started recovering.

The survey found the index of input costs for oilfield services jumped from 46.8 from 30.9 this quarter from last. The index for oilfield service prices was also higher in Q1 2018, at 27.9 from 22.6.

Further strengthening the view of an industry in recovery, the survey also found that the index for utilization of oilfield service equipment was higher this quarter, at 40.4. That’s up 11 points from the reading for the last quarter of 2018, the Dallas Fed noted.

Higher oilfield services prices began pressuring producers’ margins soon after the industry officially swung into recovery and growth mode. It was only to be expected because the services sector suffered a harder blow from the oil price collapse, with providers forced to offer huge discounts to drillers in order to stay in business.

Once prices began rising again, producers were eager to start pumping more again and not long after there was a shortage of frack crews and equipment on the horizon. This shortage led to a price spike for oilfield services and longer waiting periods. It also led to new optimism about the services industry.

Related: Oil Prices Near $70 On Geopolitical Uncertainty

This is only fair. After all, it was oilfield service providers that accounted for the bulk of the almost half a million layoffs in the industry during the downturn. It was oilfield service providers that greatly contributed to those notorious efficiency improvements that producers like to brag about so much. In the providers’ case, efficiencies meant cut-throat prices for their services.

The recovery is not universal, though, as Forbes’ Dan Eberhart noted in a recent story on the sector.

Smaller services providers—and even some big ones—are still in the red and struggling to return to profit. Consolidation is on the rise as is to be expected and, Eberhart argues, the current relationship between producers and service providers will need to change because in its current form it is unsustainable. Producers, in other words, might be in for a blow to their profit margins as service providers recover.

ADVERTISEMENT

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage



Leave a comment
  • sdd on April 02 2018 said:
    Rates are not trickling down to the employees yet. There could be a lot of experience for hire when it finally catches up.
  • Kr55 on March 31 2018 said:
    But, it doesn't stop oil predictors and producers from all drawing straight lines extrapolating the past into a rose colored future where nothing changes except their exploding production and profits.

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News