Pressure pumping companies are expanding their dual-fuel and electric frac fleets, reporting continued high demand for this next-generation equipment. While lead fracking contractors have tried to keep horsepower steady by deactivating fleets powered by Tier 2 diesel engines, RPC Inc., the owner of Cudd Pressure Pumping, noted in its July 25 earnings call that the new horsepower has made pricing discipline “challenging.”
“Many of our peers, both smaller peers and even larger peers, are fiercely competing for business for their incrementally larger equipment,” RPC CEO Ben Palmer said. “As we said, our intention is not to add capacity to the market, but net-net, at least in the short term, with some of this e-fleet capacity coming onboard, it is creating more capacity in the market.” Palmer added that his company has lost bidding opportunities to smaller and even larger competitors offering “what we believe are lower prices than we’re willing to work at.”
RPC CEO: ‘Conditions could force less well-capitalized, smaller players out of the market.’
An abundance of frac equipment moving into the Permian from gassy basins has also contributed to pricing pressure. “This frac supply, coupled with ongoing operating efficiency gains, continue to keep pump hour capacity in the Permian ahead of demand,” Palmer said. “Ultimately, we believe these challenging conditions could force less well-capitalized, smaller players out of the market, but it may take some time to reduce supply in that fashion.”
ProPetro CEO Sam Sledge said in a July 31 earnings call that his company has seen pricing pressure “here and there.” However, he added that ProPetro still sees “mainly a diesel pricing story” in the Permian with “a few irrational players that are pricing things pretty low. And that can disrupt the diesel market, which is really a minority piece of the overall market.”
ProPetro’s Q2 pumping hours with Tier 2 fleets declined 25% sequentially, with electric fleets rising 60% and Tier 4 dual gas going up “kind of mid-teens,” CFO David Schorlemer said in the company’s earnings call.
“I think you’re seeing the fading away of Tier 2 diesel engines,” Liberty Energy CEO Chris Wright said in a July 18 earnings call. “They’re not going to all be gone for probably still several years, but they’re declining.” Larger operators with steady completion programs employ very little diesel frac horsepower, but smaller operators are still employing diesel fracs and significant capex is still being spent on Tier 2 fleets, he said.
Despite reduced frac activity across the U.S., frac equipment changes have continued. According to data from Enverus Activity Analytics, 233 frac crews were active on average during Q2—a decline of 22 from Q1 and one from 2Q23.
Patterson-UTI ‘essentially sold out on everything that can burn natural gas,’ CEO says.
Patterson-UTI, owner of NexTier Completion Solutions, expects a turnaround later in 2025, based on improved Permian natural gas takeaway and demand for LNG export projects. When activity does pick up, “this demand is going to be on equipment that can burn natural gas,” CEO Andy Hendricks said in a July 25 earnings call. “Tier 2 is not going to have an easy place in there, where 80% of the equipment that we’re offering today burns natural gas. We’re essentially sold out on everything that can burn natural gas,” Hendricks said. He added that the demand increase will lead to a shortage-driven need for more equipment running Tier 4 dual-fuel engines or electric drives, as well as boosted pricing and margins.
Pressure pumpers made a point of telling investors they would rather cut idle horsepower than accept undesirable pricing. Sledge said ProPetro, however, encountered a situation where accepting lower pricing was preferable.
“We had during the quarter basically one customer that had two of our fleets make some last-minute decisions to delay some work. So that creates some whitespace and some kind of jaggedness and uncertainty in the calendar,” Sledge said. “What we then do, knowing that that work is coming back at a good price with good visibility, is try to fill the gap with whatever we can to keep the crew, the equipment hot and to cover as much fixed cost as we can. That then has a knock-on effect on something like pricing because going out looking for last-minute work is not the most profitable way to run a frac business.”
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