Summary
• US crude output hits record highs as rig count, frac fleets slip
• WTI to average $63/bbl in 2025, oil executives planning for $70-75
• Quarterly land rig day rates to end 2025 at lowest since Q2 2022
• Bankruptcies on the rise as service firms face lower prices, less work
(Reuters) – Top U.S. oilfield services firms are facing weaker pricing and revenue this year as oil producers become increasingly efficient and keep a cap on spending, according to oilfield executives and analysts.
U.S. producers, mainly shale companies which led a fracking revolution that unlocked vast new supplies of crude from rock, are pumping record amounts of oil, but using fewer rigs to do it after the COVID-19 pandemic crushed prices and spurred a boom in company mergers and new efficiencies.
The number of oil rigs has dropped to its lowest since December 2021, according to oil service provider Baker Hughes <BKR.O>. In the Permian basin, the top U.S. oilfield located in West Texas and eastern New Mexico, the rig count is at its lowest since February 2022.
The number of active frac fleets totaled 183 in the week to Jan. 23, its lowest since March 2021, according to data from consultancy Primary Vision.
This year, the oilfield services sector is set to be squeezed again as operators eye weaker crude price forecasts due to oversupply.
U.S. benchmark West Texas Intermediate crude futures <CLc1>, which ended last year largely flat at just below $72 a barrel, will average around $63 in 2025, according to Citi.
Roughly half the Texas and New Mexico-based oil executives surveyed by the Dallas Fed in December said they were using $70-$75 a barrel for capital planning.
Amid softer demand, land rig day rates are set to end the year at their lowest level since the second quarter of 2022, according to consultancy, Rystad Energy.
“Day rates are not great,” said Jasen Gast, CEO of Houston-based Oilfield Service Professionals (OSP).
Halliburton, one of the top U.S. fracking firms, saw its revenue fall 9% to $2.2 billion in the fourth quarter and is anticipating a low to mid-single digit decrease from 2024 levels due to lower negotiated prices for some of its equipment.
“We’re not immune to pricing,” said CEO Jeff Miller.
Rivals are also feeling the pinch. JP Morgan expects Liberty Energy (LBRT.N), opens new tab will see its EBITDA per frac fleet decline to $19.9 million in 2025, from $24.7 million in 2024 as pricing pressures hit margins.
“The combination of significant improvements in shale completion efficiency and a softer macro picture is leading to further weakness in the frac market,” the analysts said.
LESS WORK, MORE DEBT
The U.S. rig count peaked at 2,031 in September 2008, according to Baker Hughes <BKR.O>, when U.S. oil production was around 4 million barrels per day (bpd), data from the U.S. Energy Information Administration showed.
That compares with just 585 rigs operating when production hit a record high at 13.46 million bpd in October 2024, the data showed.
“In 2023 we were thinking the 2024 (rig count) would likely be down 1-2% compared with 2023, but it was actually down 10-11%, so we did overestimate how resilient some of these companies could be,” said Rystad Energy’s senior vice president, Thomas Jacob.
“Across the board, any E&P that we talk with, any OFS company, pressure pumper that we’ve spoken with, they all agreed that the amount of work this year could be slightly down, and pricing is definitely down,” Jacob added.
As oilfield firms face lower prices and less work, their debt is rising and more are filing for bankruptcy, according to Hal Wallace, president of Texas-based debt collector Ryan and Jacobs.
Energy companies in hot water would usually owe between $20,000 and $250,000, but that has spiked since November 2023, with some companies’ debt mounting to $5 million-$8 million, Wallace said.
In the first two weeks of 2025, energy companies owed a collective $9.59 million, compared with $75.78 million for all of 2024, and $45.55 million for 2023, according to Wallace.
“I’ve seen more bankruptcies in the last 18 months than I have in a long time. A lot of them seem to be the service companies,” Wallace said.
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