DRILLERS & FRACKERS 2024 GUIDANCE UPDATE
Most of the drilling and fracking service companies have reported their 4th quarter 2023 earnings and have released guidance updates for 2024. In general, drilling service companies are experiencing double digit YOY percentage growth in the international market while the North American fracking service companies are experiencing flat growth. The international market for drilling services and rigs is still set to grow by low double digits percentage wise in 2024. The fracking service market in North America is expected to be roughly flat in the 1st quarter of 2024 and is then expected to increase moderately throughout the rest of 2024. Below is a summary of earnings and guidance highlights from each of the drilling and fracking service companies.
Halliburton
Halliburton’s International revenue grew 17% YOY in 2023. The company stated that fundamentals remain strong for oilfield services especially in the international market. Longer laterals in North America are leading to more demand for oilfield services. The international deep offshore market is also growing rapidly. They expect international E&P spending to grow at a low double-digit pace for 2024 led by Africa and Europe.
Over 50% of their frack fleet will be electric by 2025. Halliburton expects stable levels of fracking activity in North America for 2024. While the company expects moderate North American production growth in 2024, Halliburton thinks that North American DUC counts will go dangerously low sometime in 2024. The company expects North American frack activity to be higher during the 1st quarter of 2024 compared to the 4th quarter of 2023.
Baker Hughes
2023 was the 3rd consecutive year of double-digit percentage growth in the international market. Oil pricing levels are still attractive for continued oilfield service growth in 2024. Baker Hughes thinks that the international market will experience high single digit percentage growth in 2024, down slightly from last year's double digit percentage growth. The company sees no meaningful recovery in activity in the first half of 2024 for North America. The long-term outlook for LNG remains attractive, despite Baker Hughes’ slight downward revision from the prior quarter for LNG supply growth.
Schlumberger
Just like the other drilling service companies, Schlumberger’s 2023 growth was fueled by the international markets. The company expects continued growth in international markets. Schlumberger anticipates capital discipline among North American producers to continue in 2024. The company sees minimal increase in activity in North America for 2024. Schlumberger expects mid-single digit percentage growth in North America for 2024. 1st quarter 2024 activity will be at its lowest for 2024 in North America.
Liberty Energy
Liberty Energy once again had record breaking operational efficiencies during the 4th quarter of 2023. Each quarter has seen the company set new frack pumping operational efficiencies. Liberty Energy expects 90% of their frack fleet will be primarily powered by natural gas by the end of 2024. Demand for their latest Digifleets frack fleet continues to be strong. Eventually, their Digifleets frack fleet will be 90% of their total frack fleet. The North American frack market is currently stable with stable pricing in 2024.
There is now a trend towards higher intensity fracks, which is raising the horsepower required of each frack fleet. Convective heat fractures lead to larger scaling of activity and production. The company continues to switch from diesel fuel fracking to natural gas fueled fracking.
The company anticipates flat 1st quarter 2024 frack activity followed by a moderate pickup in activity in later quarters of 2024.
Bakken frack activity is expected to pick back up in the 2nd quarter of 2024 as the weather warms up due to seasonality.
It has been a slow start to the 2024 year with the E&P operators, but activity will gradually pick back up later in 2024. Pricing is expected to be stable in 2024. If crude oil goes to $85, expect frack activity to increase significantly.
Ultimately there is a limit on how much further the current fracking efficiency gains can keep going. Sand, chemicals, and water can all disrupt a frack fleet. Over the next few years, the company believes that there will eventually be a need for significantly more frack activity to offset production declines from decline rates.
