Earning season is once again upon us, and we can expect to see drilling and fracking service companies reporting earnings before oil and natural gas producers. Already in are earnings from Baker Hughes, Liberty Energy, Nabors Industries, Schlumberger, and Halliburton, as well as updated guidance outlooks for the remainder of 2023. Currently, drilling and fracking companies remain largely optimistic for the rest of the year’s market outlook. The majority of growth can be expected to come from international, offshore and overseas markets, due largely to persistent high oil prices. The same high oil prices are keeping fracking crew and rig count numbers from seeing substantial drops in the Lower 48 US.
Since the beginning of the year we have witnessed the Lower 48 US rig count going from 820 to 767, while fracking crew counts have gone from 274 to 258. Had oil undergone a drop in pricing similar to that experienced by natural gas, we would be seeing significantly lower rig and frac crew counts. Drilling and fracking service companies have been consistent in their claims that high oil prices alone have stopped rig and fracking crew counts from collapsing in the Lower 48 US.
Baker Hughes remains optimistic on the market outlook for the remainder of 2023, expecting the global oil supply-demand balance to tighten. They hold the belief that the current spending cycle will prove to be considerably more durable than cycles in the past. Baker Hughes will see significant LNG projects coming online in the 2024-2025 period, despite North American activity continuing to slow as a result of low natural gas prices. The company has reduced their North American drilling and completion spending outlook to low double-digit growth in 2023, stepping back from the mid to high double-digit growth predicted in the last quarter. Baker Hughes believes the rig count will remain stationary, providing oil prices hold the $80/Bbl level.
Schlumberger witnessed strong activity across all sectors during 2023’s 1st quarter, and is maintaining a solid growth outlook for the remainder of 2023. Particularly strong momentum has been experienced within the international markets, something that is expected to continue throughout 2023, and where Schlumberger will focus their efforts. They are of the opinion that due to persistent weakness experienced in natural gas prices, North American growth will slow for the remainder of 2023.
Liberty Energy is in the enviable position of reporting revenue figures 59% up from a year ago. Their analysis indicates low spare market productive capacity, with widespread discipline remaining among oil and natural gas producers. They hold the opinion that ongoing fracking activity is supportive of maintenance level production in the Lower 48 US. US fracking markets remain tight; the relative strength of oil prices compared to natural gas has resulted in fracking activity shifting from gas heavy basins to those with a higher oil content. As LNG demand recovers, so will natural gas prices and fracking demand, and any softness experienced in fracking markets will be proven to have been temporary. Liberty is seeing greater fracking activity pullback from private producers than that experienced by public producers.
Nabors Industries has reported 1st quarter 2023 results in line with expectations. The international rig market has grown at a considerably faster rate than the US domestic market, with daily rig rates reaching record highs. Nabors has forecast a drop in rig numbers for the Lower 48 US during the 2nd quarter of 2023. Nabors Industries’ analysis of their rig portfolio indicates they expect to see 85 rigs active during the 2nd quarter, down from 93 in the 1st.
Halliburton has reported that their completion and production divisions have grown by 20% within the last year. All of their findings support a multi-year upcycle in oil and natural gas spending, particularly within the international markets. It is their expectation that the international markets will grow into the high teens in 2023, largely driven by the Middle East and Africa. Halliburton is of the opinion that any softness experienced by the North American natural gas market will be resolved by the addition of 6 Bcf/d of LNG liquefaction export capacity coming online over the next 24 months. Following increased customer demand in the Lower 48 US, Haliburton plans to move 3 of their frac fleets from natural gas to oil basins, reducing exposure to natural gas and increasing oil exposure.
Thanks to persistent high oil prices and strong international markets, 2023 has seen drilling and fracking service companies continue to experience strong growth; something likely to continue for the remainder of the year. The overall outlook remains largely strong, despite weak natural gas prices in the Lower 48 US.