Market trends

Optimism Prevails Across the Oilfield Marketplace

Joseph Triepke


December 2, 2018

Outdoor hardware with blue tech background.
Outdoor hardware with blue tech background.

Weather and supply chain issues have delayed the manifestation of the optimism, but 4Q17 earnings season confirmed that 2018 will be a good year.

Oilfield service companies are the headcount-intensive and capital-intensive businesses that do the heavy lifting of getting oil out of the ground and into pipelines.

We keep up with the latest public commentary from oilfield service executives by monitoring earnings call transcripts in AlphaSense, that provides conference call recaps in near real time.

Here are three, key 2018 outlook statements from the oilfield service industry on conference calls in early 2018 along with some analysis of what we discovered in transcripts:


Long-awaited news finally appears on horsepower construction at Big Red

Halliburton has finally moved ahead with frac spread newbuilding activity this cycle. During 2017, discussion on this topic from HAL’s C-suite was limited to talk of return hurdles and investment framework. Furthermore, the company was radio silent on newbuild activity in public remarks last fall, according to our review. To build or not to build is a key debate that has been ongoing for a year in the oilfield industry.[1] During the 4Q17 conference call, CEO Jeff Miller said, “Our newbuild criteria was met in 4Q, and we delivered a handful of spreads to the market.”[2] That said, he was quick to caveat that there is less HAL frac equipment in the field than at the peak, and emphasized that returns will be paramount to further newbuilding that the company executes. Halliburton’s 2018 capex budget is $1.6bn up from $1.4bn in 2017, with some of that flex up likely driven by horsepower construction. We see Halliburton’s 2017 / 2018 newbuild program (as initially planned) less aggressive than some of their smaller peers. We estimate it suggests a couple hundred thousand hhp being built this year. It will be interesting to see if that remains the case all year.

International green shoots

In 2018, SLB believes the international market will return to growth for the first time since 2014, and the projected activity growth is now leading them to start the reactivation of equipment to meet new contract start-ups. SLB expects the regional standouts to be the Middle East, Russia, Asia and the North Sea, while they expect more nominal growth rates in Latin America and Africa.

Land rig pricing power returns

On the first land contract driller conference call of the year in January, Helmerich & Payne (H&P) management repeatedly referenced an improving spot market for top tier land rigs. With H&P’s super spec rig fleet running at full utilization, and the U.S. super spec fleet pretty close to full utilization as well, the company and their peers have pricing power again. Compared to “low-$20s” for the entirety of 2H17, H&P said spot day rates are tracking in the “low- to mid-$20s” for premium rigs.[2] Following H&P’s comment, we used AlphaSense to triangulate on spot day rates levels disclosed verbally on H&P conference calls going all the way back to 2014.

With all of this oilfield service optimism comes well cost inflation. Looking ahead, consensus has formed among oil producers that U.S. onshore well costs will rise 5-15% on average this year. But oilfield service providers say their price increases will exceed this inflation level.

While reviewing Halliburton’s transcript on AlphaSense, we noticed that management said this level of price inflation probably underestimates what we will see in the market this year given tightness and customer urgency.

Now to be sure, management did point out that blanket statements like this are difficult to make, because starting points play into this, and those can vary. But Halliburton is pushing their prices higher in early 2018 and sees a runway to continue to do so throughout the year.

While oilfield service customers have talked recently of austerity and capital discipline, we are seeing signs that they will spend 15-20% more y/y with oil prices near multi-year highs in the low-$60s.[2]

In fact, in late-January we wrote in a note to our clients about the potential for “stealth budget raises” after recognizing the first of what will likely be multiple E&P company disclosures about spending at the top end of capital budget ranges.[4]

Most oil producers describe their year-ahead capital spending programs in a range. By opting to spend at the high-end, capital conscious firms can hit their spending guidance, while still quietly increasing spending to accommodate the kind of oilfield inflation that Halliburton hinted at above.

This is a trend we will be tracking throughout the year, using Alpha Sense to make our monitoring more efficient.

Joseph Triepke is the founder of, an independent research firm delivering oilfield market intelligence to subscribers. Prior to launching Infill Thinking, Joseph was an equity research analyst covering the energy industry for large buyside and sell-side institutions.

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Joseph Triepke

Joseph Triepke is the Founder & Principal Research Analyst at Infill Thinking and an oilfield service marketplace expert.

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