Roughly 20% of the hydraulic fracturing fleets that were active in mid-2018 have been idled or are in the process of being idled, Denver-based Liberty Oilfield Services said in its earnings results last week. The fracking services company was not specific about the geographic region it was referring to, but it is presumably the US. Liberty works almost exclusively in US shale regions – which account for the majority of global fracking activity.
Oil prices contracted dramatically in late 2018, between October and the third week of December. During that time benchmark WTI prices fell from the mid-US$70s per barrel to mid-US$40s per barrel on concerns over a global supply glut, stagnating economic growth and therefore demand.
Not surprisingly, shale drillers have reined in their spending as a result. With an increasing number of well completions being delayed, as well as a broader reduction in drilling, large and small oilfield services companies alike have been hit by the new downturn in crude prices.
Pricing for fracking services also shrank because of an oversupply of staffed frack fleets when the fourth quarter of 2018 began, which was compounded by the reduction in customer activity.
“The fourth quarter of 2018 was challenging from a fleet utilisation perspective,” said Liberty’s CEO, Chris Wright, in a statement. “A number of customers made last-minute decisions to defer completions in the fourth quarter due to a combination of capital budget and cash flow management decisions brought on in part by the rapid drop in the commodity price in November and December,” he added.
“While this was disruptive to our fourth-quarter work calendar, we believe the focus on capital discipline by operators is ultimately a positive factor for the service industry as we move towards a sustainable production environment that could ultimately lead to less volatile activity levels and perhaps even a steadier commodity price,” Wright said.
“Our customers are still finalising budgets for 2019 due to the rapid commodity price decline at the end of 2018 and we expect to have a much clearer picture of full-year 2019 completions demand by the end of the first quarter,” he added.
Liberty reported revenues of US$473 million and a profit of US$34 million, or US$0.27 per share, for the fourth quarter of 2018. This is lower than analysts’ estimates of US$0.31 per share, according to Refinitiv IBES data reported by Reuters.