Once the fastest growing—and most controversial—oilfield services in the U.S. shale boom, fracking is getting hammered as oil prices near a two-decade low and producers stop completing new wells.
Fracking companies, which pump water, sand and chemicals into wells to release trapped oil and gas, helped turn the United States into the largest oil producer in the world. The business became despised by environmentalists and politicians who called for fracking to be banned.
Now, with oil prices falling below the cost of production, oil and gas producers are canceling contracts and forcing providers to idle their giant pumps and vats of chemicals.
An estimated 31 hydraulic fracturing fleets, or 11% of those currently operating, were turned off in the last week, according to data from consultancy Primary Vision, and more than 40% of the 421 operating a year ago have been side-lined.
“It’s a bit of a panic in the oil field,” said Artem Abramov, head of shale research for consultancy Rystad Energy. Work is declining faster now than during the 2014 oil downturn because oil and gas producers have no financial backstop.
“Many firms are stopping all activity right now,” Abramov said.
In the top U.S. shale field, Rosehill Resources is halting all drilling and well completions. Laredo Petroleum said next month it will stop completions for the remainder of the year.
The reductions are falling hardest on the fracking providers. FTS International plans to cut 159 workers in the Permian on top of 35 workers in early March. ProPetro Holding Corp. on April 1 said it did not have jobs for two pricey electric frack fleets it began building last year. The Midland, Texas-based firm cut jobs last week.
Top oilfield firm Schlumberger on March 31 said it would accelerate a restructuring of its North America land business, a reorganization that previously included idling up to 50% of its frack fleets.
“The rug got pulled out from under the pressure pumpers in the back half of March and it’s about to get bloody,” analysts at Tudor, Pickering, Holt & Co wrote on March 30
The backlog of uncompleted wells will grow, said Bernadette Johnson, a vice president at researcher Enverus. They could be fracked to produce oil if prices rebound.
At the end of February, there were 7,637 wells drilled but not completed in the United States, down about 60 from the prior month, according to the U.S. Energy Information Administration.
The U.S. oil and gas rig count, an early indicator of future output, fell by 17 to an all-time low of 301 in the week to May 29, according to data from energy services firm Baker Hughes Co. going back to 1940.
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