US oilfield service providers anticipate a rig count recovery later this year due to high prices.
US oilfield service providers anticipate a rig count recovery later this year due to high prices.
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Oilfield Service Providers Signal Rig Count Recovery as Oil Prices Rise
Oilfield service providers are optimistic about a recovery in rig count, a key indicator of future oil and gas production, later this year. The recent uptick in oil and gas prices has boosted their confidence.
In the second quarter, U.S. shale producers significantly reduced drilling and well completion activities, which consequently reduced the demand for equipment and services. However, with U.S. crude prices climbing back to $80 per barrel, service companies are now betting on a recovery in demand. The outlook seems promising as uncertainty around crude oil and natural gas prices has started to fade away.
John Lindsay, the Chief Executive of Helmerich & Payne (HP), expressed his optimism, stating that the drilling market is starting to show signs of improvement. He expects the rig count activity to hit a bottom in the current quarter, ending in September, with a recovery anticipated in the subsequent quarter.
Positive sentiment and better-than-expected profits have led to a surge in Helmerich & Payne shares, which rose by 5.9% to $45.19 during afternoon trading.
Rival company Patterson-UTI Energy (PTEN) also shares the positive outlook, forecasting an increase in rig count and fracking activity later this year and next. According to Andy Hendricks, CEO of Patterson-UTI Energy, the industry rig count is believed to be near its bottom. The company anticipates additional rig releases in the coming weeks, followed by a recovery in drilling activity later in the year.
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While speaking about pressure pumping, Hendricks mentioned that the activity in this segment has already reached a trough in July. Although pressure pumping prices for spot work have declined by about 30% in recent months, they are expected to bounce back as activity picks up.
In line with these expectations, Nextier Oilfield Solutions (NEX) also predicted a recovery in fracking demand for the next year. However, the company highlighted that a shortage of equipment could hinder the growth of U.S. oil and gas production.
Patterson-UTI, in the process of merging with Nextier, recently reported a quarterly profit of 45 cents per share, surpassing analysts’ estimates by 1 cent. As a result, Patterson-UTI shares witnessed a 2.2% increase, trading at $15.75, while Nextier shares rose by 0.9% to $11.77 during Thursday afternoon.
The positive sentiment expressed by oilfield service providers regarding a recovery in rig count and drilling activity is a promising sign for the oil and gas industry. As oil prices continue to rise, it is expected that demand for equipment and services will increase in the coming months. This recovery is essential for the overall growth of the industry and will contribute to the revival of the U.S. oil and gas production sector.
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