Superior Energy Becomes Latest Service Firm to Abandon Pressure Pumping
As completions activity slows down in the US, the second service company in a week’s time has said it is exiting the business of hydraulic fracturing.
Superior Energy Services has announced plans to eliminate its entire US pressure pumping business unit, becoming the second oil field service firm to make such a decision this month.
In November, Superior laid off more than 100 people in the Permian Basin and is anticipating a write-down of $45 million and will use any proceeds from asset sales to pay down debts, according to Reuters.
The Houston-based service provider has an international footprint and also offers drilling and production product lines.
A week ago, smaller rival Basic Energy Services said it hoped to raise between $30-45 million by selling off most of its pressure pumping equipment.
At the start of this year, Rystad ranked Superior as the 13th largest pressure pumper in the US. As of the divesture, the firm owned 13 fracturing fleets with about 650,000 hydraulic horsepower, said the Reuters report while citing Primary Vision, a fracturing-focused market research firm. By comparison, Basic held 11 spreads with 500,000 hydraulic horsepower.
Both companies are moving away from hydraulic fracturing as the US shale sector moves deeper into an activity slump that began in June of this year. That month, C&J Energy Services and Keane Group announced plans to merge and become the third-largest pressure pumper in the US. The combined company was recently renamed NexTier Oilfield Solutions.
Driven by a decline in Permian activity, the US fracturing spread count moved down from 340 to 335 this week, according to data from Primary Vision. The firm said most other shale plays are holding flat, while the “Mid-Con” region is the only one showing a sustained increase in fracturing activity.
The firm also highlighted in a recent note that proppant loadings have slipped to a 5-year low and that shale producers are reducing inventory of drilled-but-uncompleted wells as they stack drilling rigs.
“The proppant data shift in the Permian supports the decline in completion crews, and shows the extent of the slow down,” wrote Mark Rossano, an analyst with Primary Vision. “The fact that completion crews in the area continue to be released means the proppant loadings will shift lower into year-end. This will keep pressure on pricing and remain a headwind well into the middle of next year.”
US production growth is projected to slow down next year to just 440,000 B/D compared with 2019’s year-over-year growth figure of about 1 million B/D, according to a recent report from IHS Markit. The market intelligence firm said that accelerating production declines in existing wells coupled with new capital constraints will see this growth stall out by 2021.