Service companies have been slower to respond to higher oil prices than operating companies.Overall U.S. shale appears set for continued growth in 2023.We have seen a wide range in oil prices during 2022. From the start of the year, when West Texas Intermediate-WTI, was trading in the upper $ ’60s, to late March, where it topped $130 per barrel. In the last six weeks, there has been a collapse of this closely watched commodity benchmark, with WTI briefly trading below $70.
In the case of PTEN, tightness in the Tier I, Super-Spec category has resulted in a virtual sell-out in this class. The PTEN rig count grew from 113 to 132 in 2022, with another four lower-tier customer-funded upgrades to Tier I scheduled for 2023. Tier I rigs can “walk” to the next pad well, saving rig-down time for simple moves, as well as other upgrade pipe handling and pumping capabilities.
A couple of drivers here seem to be responsible for their performance. Revenues are up 20% in the case of SLB, but EPS has doubled since last year. HAL’s revenues are up 15% YoY, but EPS has more than doubled. LBRT added upgraded Tier IV six fleets in the quarter from stacked OneStim equipment that was legacy SLB. Other fleets are Tier IV Dual Gas Blend-DGB to reduce diesel consumption. Further growth will come from electric fleets that can get power from either natural gas or directly from the grid. PUMP is also going the DGB route, but is also ordering new build electric fleets and expects to have 2-fully electric fleets available for a contract beginning in Q-3, 2023.
U.S. Silica, is a premiere sand supplier to the fracking industry. It grew revenues over 100% YoY, and EPS from -$0.19 to $0.35. The company generated about $175 mm in free cash over course of 2022. Contribution margin per ton was $24 in Q-3, and volumes were 3.5 mm tons. This represents a 20% increase in volumes and a 2.5X increase in contribution margin. The company is down about 40% from mid-year highs, with legacy debt of ~$1.1 bn hanging over the stock.
I think the oil is not the natural resources and knowing is course of high inflation. So that we must forget it and minimize price for global economy peace to prevail.