• 5 minutes USGS Announces Largest Continuous Oil Assessment in Texas and New Mexico
  • 10 minutes Venezuela continues to sink in misery
  • 13 minutes U.S. Senate Advances Resolution To End Military Support For Saudis In Yemen
  • 16 minutes IEA Sees Global Oil Supply Tightening More Quickly In 2019
  • 7 mins Paris Is Burning Over Climate Change Taxes -- Is America Next?
  • 4 hours Rage Without Proof: Maduro Accuses U.S. Official Of Plotting Venezuela Invasion
  • 4 hours $867 billion farm bill passed
  • 3 hours Has Global Peak Diesel Arrived?
  • 23 hours OPEC Cuts Deep to Save Cartel
  • 20 hours Sleeping Hydrocarbon Giant
  • 16 hours How High Can Oil Prices Rise? (Part 2 of my previous thread)
  • 22 hours Air-to-Fuels Energy and Cost Calculation
  • 21 hours What will the future hold for nations dependent on high oil prices.
  • 1 day And the War on LNG is Now On
  • 22 hours Global Economy-Bad Days Are coming
  • 19 hours Could Tesla Buy GM?
Former Venezuelan General Takes Helm Of OPEC

Former Venezuelan General Takes Helm Of OPEC

Ex-general Manuel Quevedo, Venezuela’s current…

Saudi Arabia Can Outwait The Khashoggi Crisis

Saudi Arabia Can Outwait The Khashoggi Crisis

Turkey has ramped up the…

Payback Time: Oilfield Services Raise Prices

oil jack

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.

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

Oilprice - The No. 1 Source for Oil & Energy News