The North American market for hydraulic fracturing services is preparing for a downturn in 2015 due to rapidly falling oil prices. Service providers and equipment manufacturers report that the market and their customers have not yet changed, but all expect changes in the immediate future and are developing plans to deal with the downturn.

In its revised downside scenario, IHS market service PacWest expects a 12% decrease in the number of horizontal wells frac’ed in the U.S. Land market in 2015 and an 8% decrease in frac demand for 2015. These figures represent a significant downgrade from the base case scenario forecasts published in the recent WellIQ and PumpingIQ reports – a 6% increase in the number of horizontal wells frac’ed and an 8% increase in frac demand for 2015.

Despite the imminent downturn, equipment delivery books still appear strong for 2015, particularly for the first half of the year. In its base case scenario, PacWest expects 1.4MM horsepower (net capacity additions) to be delivered into the U.S. Land market in 2015, representing an 8% increase in hydraulic fracturing capacity from the previous year. However, in its revised downside scenario, PacWest expects only a moderate reduction in net capacity additions, from 1.4MM to 1.1MM horsepower. In this scenario, PacWest expects some first-half 2015 orders to be delayed to the second half of 2015 and 2016, and some orders to be cancelled.

Falling frac demand and increasing frac capacity will quickly lead to falling capacity utilization in 2015. This will create "challenging market conditions" for many service providers and equipment manufacturers, PacWest says.

“The frac industry is preparing for a tough 2015,” says Christopher Robart, partner at PacWest. “Many service providers have just begun to see improvements in pricing and margins. This downturn will drive a focus on improving efficiencies and cost containment. Additional industry consolidation is also expected.”

PacWest will hold a webinar on Thursday Dec. 11, 2014 at 9:30am CST to discuss its outlook for the market. The call is open to the public.

In addition to the forecasts contained in these latest, leading reports on drilling and completion activity and hydraulic fracturing -- published October 24 and November 14, respectively -- PacWest will present a revised set of downside forecasts that reflect changes in the market since Thanksgiving.

More Resources:
IHS Unconventional Energy Blog