“I think we’re going to have quite a few bankruptcies this go around,” Locke said by telephone. “Our experience in the Bakken, after 15-20 years up there is probably over for drilling, which is really really sad.”
To combat that, some explorers such as Parsley Energy Inc. have have asked their contractors to help them cut as much as 25% from their oilfield costs. But industry consultant Rystad Energy estimates that explorers may only be able to get about half that, with so little for the servicers to give up this time around.
The last time that oil prices tanked, from more than $100 a barrel in 2014 to roughly $26 in 2016, service companies gave up major concessions to their customers, partly to keep market share. Now companies such as Patterson-UTI Energy Inc. and RPC Inc. are working from a new playbook: scrapping excess frack pumps for the first time ever, turning instead to idle gear in a pinch.
“When a pump breaks, I drag the truck off to the side and I go grab another one that was working last time I had it on a job, put it in line and run that till it breaks,” Richard Spears, an industry consultant who’s worked in and around the oil patch for decades, said on a recent Evercore ISI webinar.
“You can do this incredible discounting as long as you’ve got idle equipment that was in good shape,” he said. “But eventually you burn through even all that.”
This article was provided by Bloomberg News.