M & M Resources discusses that since start of the year, almost half of the privately held oilfield service company owners in the United States have seen their work volumes slump by more than 25%, and nearly 60% are bracing for more reductions, according to Citadel Advisory Group.
Fort Nelson, BC -- (SBWIRE) -- 11/05/2015 -- The Fort Collins, CO-based investment banker conducted a survey between Aug. 11 and Aug. 28 of more than 500 owners and C-level executives of privately held oil and gas and affiliated industries. The "Mid-Year Checkpoint: Oilfield Rates & Costs," which was issued this week, compiles the responses to the survey.
More than three-quarters of respondents said they have reduced their rates by 10% or more since the start of the year, and 60%-plus expect to reduce their rates further to counter the decline in West Texas Intermediate (WTI) crude oil prices.
"The early summer WTI head-fake above $60 provided some temporary optimism to many people in the business," said Citadel Managing Director Chris Frevert. "We wanted to see if the current down-leg into the $40s was putting additional pressure on service providers, and if so, how much and what was being done to weather the storm."
Citadel had conducted a similar survey in February, finding then that only 8% were feeling the effects of the price downturn. By August, all of the respondents were feeling the pain.
Asked what the average percentage rate reduction had been for the three largest customers since the downturn began, more than 25% said it was 16%; 21-25% said it was nearly 11% and 16-20% said it was almost 19%. The average rate reduction for 10-15% of those surveyed said they had cut rates by almost 33%, while about 10% said they had negotiated a 21%-plus rate reduction for their best customers.
"There is no more to give," said an executive who works for a Niobrara formation completions company. A respondent based in Oklahoma said, "Prior to the crash, oil companies added many requirements that added cost. No margins [are] left for our service company [and we are] really wondering, do oil companies intend to kill service company support system?"
Another respondent, who works in the Eagle Ford Shale, said, "I am proactively guiding my ship to as soft a landing as possible. This feels like the summer of 1986."
Asked in August where the price of WTI would be at the end of 2014, more than 80% of the respondents said it would be less than $55.00/bbl. Oil was trading at $45 at the end of the survey period.
"Any optimism that oil will make any meaningful recovery by year-end seems to be fading quickly for those in the trenches," Frevert said.
A similar downward trend is being reported in the workforce. Almost all (97%-plus) have laid off employees, and more than half of those responding said they expect more job cuts in the coming months.
"If oil drops to $36, I expect a 90-100% reduction" in the workforce, said a consulting company respondent.
As with the February survey, 70% of the respondents have been in business for more than 10 years.
"Most of these folks have been here before and have the knowledge and determination to ride this out," Frevert said.
In addition to questions about company demographics such as basin focus, revenue and workforce size, the survey also assessed company-driven cost reduction strategies and the end result of price reduction negotiations.
Among those responding, the Eagle Ford represented the largest percentage of revenues (23%), followed by the Permian Basin and Niobrara/Powder River, both at 18%. Oklahoma/Kansas represented about 15%-plus of revenues, while 13% had most of their revenues tied to the Marcellus/Utica shales and 10% said their highest revenues were from the Bakken Shale.
About M & M Resources Inc - Reclamation Company Alberta
M & M Resources Inc. is a privately owned company established in 2004. Mike Barrette and Mike Acko currently reside in Fort Nelson, British Columbia where their head office is. Equipment solutions including construction, land clearing, mulching right-of-way, geophysical seismic mulching/slashing, lease building, low bed trucking, hazardous waste hauling, sawdust hauling.
The mission of M & M Resources is to be the company of choice for the supply of any and all Oilfield Services. We want our clients to know that we will support our customers' needs and provide a quality of service like no other, and doing so in a safe manner. By anticipating and exceeding our customers short and long-term requirements, we expect to provide a superior service to the industry.