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Oilfield Trucking Takes Hit With Shifting Needs

July 3, 2019
Oilfield Trucking Takes Hit With Shifting Needs

It looks like oil and gas exploration and production companies are getting their bottom lines’ in order with lower capital investments, the use of fewer wells, and longer lateral lengths. Problem is, this upturn is not aiding oilfield services firms.

What people may not know about the oil and gas rise that has occurred in the last four years is that most E&P companies doing the drilling are actually not making any money. This is because horizontal wells in tight rock space are expensive to build. Plus, their hydrocarbon flows usually decrease quicker than typical wells. In order to sustain an atypical well’s production levels it involves a lot of moving parts. These include pumping horsepower, chemicals, and water. This level of effort and resources isn’t necessary when digging into a standard underground reservoir of oil.

Furthermore, the current market forces along with investor expectations also got in the way of E&P companies producing as much cash as they probably could have. The big players in the shale game also tried to take advantage of using new technology in fresh basins like Permian and Bakken. But with their aggressive growth plans, it meant putting all their cash back into more drilling operations. Add on to this the fact that investors wanted to hedge the price of oil in order to buffer them from risk. By taking this cautious route it limited the potential upside when the price of West Texas Intermediate spiked to over $75 per barrel in October of 2018.

Now, investors and board-members of E&P companies have requested that drillers become more frugal with their cash. After all, in the commodities world oil is labeled a risk asset. Plus, despite all the glowing articles, experts do expect global economic growth to start slowing. With this forecast looming, E&P companies are being told to try to do more with less.

Less means the lateral lengths of wells is growing which eliminates as much need for equipment and transportation services. Add this to the fact that there are less wells than there were at this time last year. This means there’s simply less need for oilfield transportation services. And they are feeling the pinch, and it looks this downward trend will continue.

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