HOUSTON, Aug. 21, 2014 /PRNewswire/ -- PacWest
Consulting Partners forecasts strong market growth in the North
American market for hydraulic fracturing services through 2016 due
to robust drilling and completion (D&C) activity, with frac
pricing increases expected through 2015. Tightening market
conditions are resulting in supply chain constraints in key growth
plays. Constraints in the availability of frac sand and the
logistics capacity to transport the frac sand are leading to cost
escalation and work delays. PacWest provides an in-depth
analysis and set of forecasts for the North American and
International frac markets in the 14Q2 release of its PumpingIQ
report, just published on August 15,
2014.
D&C activity is robust in both the US Land and Canadian
markets, with HZ wells frac'ed increasing 9% in 2014 and HZ frac
stages increasing by 19%. In the US Land market, significant
growth in key plays – the Permian, DJ Basin, Utica – and continued
growth in the Eagle Ford, Marcellus, and Bakken is driving growth
across all D&C activity metrics, including rig count, well
spuds, wells frac'ed, and frac stages. In the Canadian
market, strong growth in the Montney and Duvernay plays, in
addition to growth in the Cardium and Deep Basin, is driving
increases in D&C activity.
According to PacWest Managing Partner, Nilesh Dayal, "Rapidly tightening market
conditions have resulted in price increases for many
E&Ps. After more than 3 years of pricing pressure in the
frac market, the dam has finally broken for pricing, and service
providers are finally having success in negotiating higher
pricing."
While market conditions are driving price increases, costs
recovery on key consumables, including sand and chemicals are
driving a large part of the increases. North American frac sand
demand is expected to increase by nearly 30% in 2014, compared to
2013. This has resulted in logistics constraints in both rail
and trucking capacity and price increases across the sand value
chain.
However, not all pumpers are consistently benefiting from price
increases. Chris Robart, PacWest
Partner notes that, "There has been wide variance in price
increases across pumpers/customers, with some reporting price
increases as high as 20% in key growth plays where market
conditions are most tight. However, price negotiations will
continue to be on-going and in many cases higher prices will not be
implemented until late 2014."
Given the evolving demand landscape and operational
requirements, including aging fleets, continuous pumping
operations, and increased refurbishment activity, PacWest has begun
analyzing the frac market in terms of "Marketed Capacity" and
"Effective Utilization." PacWest analysis reveals that
utilization is quickly improving, and estimates that raw
utilization is 84% in 14Q3, while effective utilization is 90%,
with higher rates in key growth plays.
In response to increased demand, pumpers have upgraded 2014
newbuild programs and have begun committing to sizable 2015
newbuild programs, with 1.4 million HHP in net capacity additions
estimated for 2014 and 1.6 million HHP in 2015. "While
capacity additions may allow some pumpers to secure more work, it
will be supply chain execution and delivery that will make or break
their bottom lines," adds Mr. Dayal.
PacWest will hold a conference call on Thursday August 28, 2014 at 9:30am CST to discuss these and other views on
the market. Call details are provided below. The call is open to
the public.
Conference Call:
Dial-in: +1 (800) 830 3581
International Dial-in: (262) 320 4698
Passcode: 2922791
Presentation Link:
https://join.me/PacWest_Market_Update
For more information, contact Jennifer
Thomas, 713.929.3285, jthomas@pacwestcp.com.
SOURCE PacWest Consulting Partners