Living-Dead Equipment Adds to Oversupply

Topics: Asset/portfolio management
Courtesy of Dan Hill, Texas A&M University.
Yards filled with idled drilling rigs have sprouted up like forests in Midland, Texas, and in other places near where unconventional drilling once boomed. Despite the drop in drilling, production in the surrounding Permian Basin was still up in 2015.

Those who track drilling and fracturing equipment are apt to mention zombies. That is the living-dead machinery still counted as available to work, but more likely now to be used for spare parts or scrapped.

In both those equipment markets, one-quarter or more of capacity is expected to disappear over time, but it is a slow-moving sort of destruction with an uncertain outcome.

Richard Spears, vice president of Spears & Associates, sees fracturing trucks massed at a service company repair facility in his hometown of Tulsa, but no one ever seems to be working on them.

“There has never been a time when the fleet has not been maintained. Based on our research, capacity falls by 5 million horsepower through the bottom of the market in the summer of 2016,” said Spears, who works for a company tracking the fracturing service business.

That represents about one-quarter of the capacity of the fracturing business where the total horsepower indicates how much water and sand can be pumped into a well to fracture the rock.

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Living-Dead Equipment Adds to Oversupply

Stephen Rassenfoss, JPT Emerging Technology Senior Editor

28 January 2016

Volume: 68 | Issue: 2