Rystad forecasts increased U.S. fracing capabilities by end 2018

4/19/2018

HOUSTON -- Rystad Energy said that pumping horsepower and sand supply are both tight in certain regions of the U.S. However, supply shortages are likely to be temporary as pumping horsepower and sand supply will see significant additions in the second half of 2018.

The company expects that in the pressure pumping market, there will be over 2 MM in net additions and a number of refurbished units returning to the workforce. In the frac sand market, Rystad expects over 50 MM tons of sand capacity to be added by the end of 2018.

The company also predicts that pumping horsepower will exceed 23 MMhp, from which the net new additions are expected to more than 2 MMhp. Capacity is expected to be particularly tight in the Permian in the second quarter before the majority of new equipment comes online in the second half of the year. More than half of total U.S. pumping capacity will be in the Permian.

In addition to new-builds, re-activations of cold-stacked equipment of various states of repair – including equipment that may have been written off as attrited. Equipment manufacturers are focusing some capacity on refurbishing pumps cannibalized during the downturn. But the service industry remains cautious. Below are quotes gathered during interviews.

“We are comfortably behind at the moment, and we are just fine with that.”- V.P., equipment manufacturer.

“I think the refurb market is about tapped out, there isn’t much left to rebuild; people will have to start going to new builds from now on.”- V.P., pressure pumper.

“We have actually delayed our expansion plans this year just because we couldn’t get the new fleets delivered fast enough.”- sales manager, pressure pumper.

“Replacement parts are getting harder and harder to find. Companies just won’t keep large inventories like they used to, they don’t want to get burned again.”- operations manager, pressure pumper.

Rystad expects 52 MM tons of new frac sand supply to hit the market in 2018 with the significant portion of this supply to come online before the second half of the year. In addition, they expect the majority of the 2018 additions to be concentrated in-basin in the Permian and foresee the local sand to be prominent in other basins in the next few years. While the industry waits for the supply increase to hit, we are currently seeing bottlenecks in the sand supply chain for a variety of reasons.

Trucking will continue to be a major bottleneck in the sand supply chain. Our primary intelligence results quoted below also confirm that conclusion.

“It’s not just the quality of roads anymore, it’s the NUMBER of roads. I just don’t think there are enough roads to service this kind of demand without traffic jams of semis all over the Permian.” – V.P., services company.

“You can’t just throw money at this whole roads issue; we can’t just go out there and start doing our own repairs or building new roads, so I don’t know what is going to happen.” - sales manager, pressure pumper.

“You’re going to see similar problems as to what happened in the Eagle Ford years back; roads get chewed up and no one wants to have them shut down for repairs.” - planning lead, E&P.

“That whole electronic logging device issue is just going to make things worse; truckers can’t lie or fudge the numbers anymore.” - director, E&P.

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