Last week both Halliburton and Baker Hughes had their Q4 investor calls, and as I reviewed the transcripts I thought it was interesting to see the technologies and processes they were featuring in light of both the downturn of the price of oil and their upcoming merger.
Oilfield Services get hit first
Oil prices are down, may go down further, or may go up a bit, although most analysis suggests they will stay in the $40s for a while before rising again in the next 6-18 months. Welcome to contango.
Downturns like these predictably affect Oilfield Services (OFS) pretty quickly – the drillers are not getting nearly the amount of cash flow they anticipated; the drillers reach out to services companies to renegotiate the terms of their contracts; some money is better than no money; in most cases OFS acquiesce to the drillers new terms.
In both earnings calls the companies acknowledged these renegotiations, and also affirmed that, in addition to restructuring their headcounts, they were also going to renegotiate with their suppliers in turn to get more favorable terms.
Regarding their focus for 2015, Halliburton’s CEO Dave Lesar said
“We’ll continue to manufacture our Frac of the Future equipment and plan to take advantage of the opportunity to accelerate the retirement of older fleets which operate at a higher cost, especially in 24-hour operations…. Frac of the Future not only gets the job done with 25% less capital and offers maintenance savings of up to 50%, an optimized Frac of the Future spread running under the right efficiency model can complete a well more than 50% faster than legacy equipment. And it does all of this with 35% fewer people on location. Frac of the Future represents about 30% of our North American fleet today, and we expect that number to be closer to 50% by year end.”
Frac of the Future is an ongoing model of operational upgrades designed to reduce the impact of drilling operations while optimizing production. Camila Bernal filed the above news story on the concept back in August.
“The value we have seen from the rollout of our Q-10 pumps has truly exceeded our original expectations. And despite the current market conditions, we feel it’s the right decision for our shareholders to move forward with this initiative.”
Dean Prather mentioned “proprietary pumps” as a key portion of the Frac of the Future in the above video, and these Q-10 pumps are what he was referencing. Engineered for high horsepower, high capacity, high reliability, and longer performance they focus on decreasing footprint and non-productive time.
Baker Hughes CEO Martin Craighead was even more product focused.
“During the year our global products and services group introduced more than 160 new products and services to the market. That means on average we brought a new solution to the market place every 55 hours …. Among the most impactful innovations we have brought to market has been our ProductionWave solution, which integrates cutting edge artificial lift technologies with production chemicals and remote monitoring services to optimize production in the unconventionals. …. today we already have approximately 5000 ProductionWave solutions installed in North America and a growing number of international markets. Not surprisingly, artificial lift was our fastest growing product line in 2014.”
ProductionWave uses electrical submersible pumps (ESPs) and provides the opportunity for better economics and reduced HSE risks over traditional rod-lift pumps in lower volume applications.
“FASTrak is also gaining momentum. This technology remains the world’s only commercially available service designed to reduce reservoir uncertainty and maximize ultimate recovery by analyzing and extracting samples while drilling. This services exploration markets with deployments in 13 different countries across each of our operating segments and is part of the reason why we’ve increased our share of drilling services in virtually every deepwater market around the world.”
FASTrak is a Logging While Drilling (LWD) technology that allows fluid analysis, sampling, and testing during drilling, which enables a much quicker read on downhole pressure and fluid characterization conditions.
“SHADOW plug is another example of our recent technology breakthrough. By leveraging our strength and completion systems and material sciences, we created the world’s first large-bore plug which incorporates a disintegrating metallic ball.”
Shadow Frac Plugs are designed to stay downhole after hydraulic fracturing by using disintegrating balls that hold pressure during the frac, but then dissolve away during the production cycle. Since you don’t have to retrieve the plug, you can finish up your completion quicker.
This was an interesting exercise for me, and highlighted some of the ways that the two companies will be able to dovetail together during the upcoming merger.
What do you think? What other technology or products do you expect will help OFS weather the downturn? Leave a comment below.
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