Sand and steel
Sturdier oil prices are breathing new life into the companies that support drilling.
To sand and pipe, add water.
It’s not exactly a recipe, but these ingredients — whether combined or separate — are indicators of the health of the oil field services industry. And lately, they’ve shown that the sector is regaining its vigor as higher crude prices lead exploration and production companies to increase output, and services companies to demand more sand, water, chemicals and piping to drill, frac and complete wells.
Last week, in another sign of increasing activity, Houston’s Rockwater Energy Solutions said it made an all-stock deal valued at $207 million to acquire Crescent Companies of Oklahoma City as it seeks to expand market share for its water management and injection chemicals businesses that supply hydraulic fracturing operations. Rockwater chief executive Holli Ladhani said the deal creates a larger company focused on the U.S. and western Canada, where activity has recovered in recent months.
Oil field services companies provide fracking crews, drill and complete wells, and sell supplies and equipment to the production companies that are their clients. Services providers were battered during the two-year slump as producers idled rigs and demanded steep discounts, losing billions of dollars and laying off workers by the tens of thousands.
As oil prices have risen to about $50 a barrel and rigs have returned to U.S. shale fields, services companies have begun to rebound. Just over a week ago, Halliburton of Houston, which slashed some 40,000 jobs worldside between 2014 and 2016, said it was hiring again, adding 2,000 jobs in the U.S. in the first quarter.
That surging activity has led to record demand for sand, which is mixed in massive amounts into fracking fluids to prop open shale rock fissures to allow oil and gas to escape. After virtually selling out of sand earlier this year, Houston-based Hi-Crush Partners said it would spend $275 million to buy the Permian Basin Sand Co. to beef up its sand reserves.
In Atascosa County, south of San Antonio, the Pennsylvania company Preferred Sands has proposed developing a sand mine to produce 300 tons to 400 tons of sand per hour, although the plan has run into fierce community opposition.
Piping is also getting a boost. The specialized steel piping for the oil and gas industry includes drill pipe used for drilling and creating wells; casing pipe that’s cemented into place to line the walls of the well and give it structural stability; and tubing pipe inserted into the well through which the oil and gas travel. As companies drill longer and longer horizontal wells to produce oil more efficiently, they need more pipe; global demand for well piping will grow by more than 6 percent a year through 2020, driven largely by North American shale drilling.
Vallourec, a Paris company with North American headquarters in Houston, has in recent months added some 250 workers at its U.S. plants to meet rebounding demand.
“It took us a couple of months to determine that activity was sustainable to justify rehiring,” Nicolas de Coignac, Vallourec’s North American president.”It’s not a bubble.”
“It took us a couple of months to determine that activity was sustainable to justify hiring. It’s not a bubble.” Nicolas de Coignac, Vallourec