Analysts: Frac Crew Shortage, ESG Costs Could Stymie Production

Price volatility induced by the war in Ukraine should ease eventually, but DUCs will be plentiful this year and the era of endless production growth and low costs is likely over, says BTU Analytics.

Producers will be squeezed by a lack of frac crews and tight budgets as capital is dedicated to ESG goals, analysts from BTU Analytics said. (Source: Hart Energy; Mosista Pambudi, Sashkin/Shutterstock.com)

Producers will be squeezed by a lack of frac crews and tight budgets as capital is dedicated to ESG goals, analysts from BTU Analytics said. (Source: Hart Energy; Mosista Pambudi, Sashkin/Shutterstock.com)

A tight labor market is creating a shortage of frac crews which will result in another backlog of DUCs, BTU Analytics said during an April 6 webinar. This will hinder the ability of producers to ramp up oil and gas production.

Analysts also pointed to capital commitments for emissions reductions, made as part of corporate ESG policies, as posing headwinds for E&Ps strapped for funds for capital investments.

The oil and gas industry is struggling to grow production following the departure of many employees during the pandemic, said Matthew Hagerty, senior energy strategy analyst for BTU. This is compounded by historically low unemployment. Couple that with tightness in the materials market, from steel to frac sand, and the near-term pricing ingredients exist for a boom in oil and gas production.

At least, that has been the pricing environment in the past. Not this time.

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Joseph Markman

Joseph Markman, senior editor for Hart Energy, covers markets and provides data analysis for all Hart Energy editorial products.