As exploration expands, shale companies are fully utilizing all available fracturing equipment and staff, which is accelerating cost increases and pointing to further deterioration of supply chain disruptions across the industry.
After giving its best quarterly profit in seven years on Monday, the manager said North American oil drillers could see spending increase by more than 25 percent this year, while overseas explorers could moderately increase by about 15 percent.
The world's largest fracturing service provider has seen tight supply of labor, trucking and raw materials, with as many as 80 percent of workers recruited from other regions in some regions. Miller, the company's chief executive, said on a conference call with analysts that even ordinary sand like the one Halliburton used to spray into a well to help fracturing oil-soaked rock is now becoming increasingly difficult to find.
The tightness is good news for Halliburton, which has raised its dividend for the first time since 2014 and said orders for pumping equipment have more than doubled. The company's fracturing business is currently fully loaded, and oil companies pay higher prices for so-called completions. ConocoPhillips and peers such as Devon Energy have warned since last year that inflation in the oil fields is a threat to rapid growth.
"It's an excellent combination of conditions for Halliburton," Miller said. "Our current orders for completion tools have more than doubled from a year ago, which means strong growth and profitability will be seen again in 2022."
The Federal Reserve Bank of Dallas has said in recent weeks that oil and gas exploration companies are paying record costs as the economic growth underpinning energy demand rebounds from the pandemic-induced rout. Supply chain disruption in the Permian Basin, the largest oil field in the United States, makes drilling projects more complex, time-consuming, and expensive.
Miller said there's no reason to expect things to change soon.
"I don't think 2023 will end anyway," Miller said. "I think the road is much more than that."
Expansion cycle
Halliburton and his larger rivals, Schlumberger and Baker Hughes, agree, predicting a new multi-year expansion cycle for oilfield contractors, even though Halliburton is the only of the three companies to increase shareholder dividends. The company fell 1.4 percent to $27.15 at 11:03 a.m. New York time due to a general decline in stock markets caused by geopolitical tensions in Eastern Europe.
Schlumberger said last week that the company would raise spending by as much as 18 percent to $2 billion, in preparation for the years of growth it expects its global customers will bring.
Halliburton, the largest oilfield contractor in the United States and Canada, will benefit the most from a north-american-led pick-up in spending, with rival Schlumberger saying last week that north American oilfield spending should grow by at least 20 percent.
Due to the recovery of shale drilling in the United States, Baker Hughes also believes there will be a growth boom. The Houston-based company posted a 28 percent increase in orders last week, driven largely by a business line of large turbines that liquefy natural gas for export.
This article originated from the financial world