After cutting spending and staff levels to the bone, U.S. oil executives say they are getting ready for new drilling projects as a 50 percent increase in crude prices since February leads them to believe the worst of the downturn may be over.
Any price rise above $50 per barrel could fuel a resurgence in the U.S. shale industry, which saw drilling and fracking of new wells put on hold over the past year as oil prices plumbed near $25 per barrel.
But prices have steadily risen to around $44 per barrel, near levels where money could start flowing again. While myriad factors could push prices lower again and many companies are stuck in bankruptcy, prominent executives say there is a pending upswing in oilfield activity globally and that work will come back fastest in North America.
“The outlook for commodity prices is improving,” Al Walker, chief executive of oil producer Anadarko Petroleum Corp (APC.N), said on Tuesday after the company posted better-than-expected quarterly results.
“It goes without saying that things look better today than they did 90 days ago.”
Dave Lesar, chief executive of oilfield services provider Halliburton Co (HAL.N), said he believes the U.S. drilling rig count has hit a bottom and likely will rise later this year.
U.S. oil drillers last week cut rigs for the sixth week in a row to the lowest level since November 2009. The industry has shed more than 250,000 jobs globally, nearly half in the United States.
“Certainly with oil prices a little higher, people are more optimistic,” Lesar said on Tuesday. “We do think that potentially we’ll see an upswing in the rig count in the back half of the year.”
A rising rig count would translate into more wells being drilled that can be fracked.
On staffing, Halliburton noted it hired 21,000 people globally in 2014 – before laying many of them off in 2015 as oil prices crashed – and could quickly add staff back.
Any rise in oil field activity would be a boon for Halliburton, which this week scrapped its planned buyout of rival Baker Hughes Inc (BHI.N).
Both companies are now trying to anticipate needs from customers, such as Anadarko, which send ripples across vast supply chains when they lift spending.
Last week, Pioneer Natural Resources (PXD.N) CEO Scott Sheffield said he would add rigs if oil stays near or rises from $50 a barrel. And Whiting Petroleum Corp (WLL.N), the largest oil producer in North Dakota, said it would soon frack 44 wells to bring them online – just weeks after saying it would freeze virtually all new work.
Baker Hughes expects oil at $50 or above would fuel the fracking of several hundred wells per month.
“This represents a significant near-term opportunity,” Martin Craighead, the chief executive of Baker Hughes, said on Tuesday.
The services companies are telling analysts they are ready to capture new orders.
“When this thing snaps back, it’s going to snap back hard,” said Lesar, the Halliburton CEO. “We believe that when this market recovers it will be North America that responds the fastest, offering the greatest upside.” Source.