Frac Tracker Sees Plunging Spread Count

Frac Tracker Sees Plunging Spread Count
Could the number of frac fleets in US shale basins drop by nearly one-third over the next six months?

The number of frac spreads operating in U.S. shale basins could fall by more than 20 percent in less than one month’s time, predicts Primary Vision LLC, which gauges the upstream industry’s health based on hydraulic fracturing activity.

On Wednesday Primary Vision reported that the number of frac spreads, also known as “frac fleets,” had decreased by 19 week-on-week to a new total of 298. Moreover, the firm contends the six-percent decline in spreads – the equipment used to perform a frac stimulation job to complete a well – likely heralds a months-long downward trend.

“All basins are getting corrections and we don’t see this changing over the course of the next six months,” Primary Vision stated in its weekly “Frac Insights” email newsletter.

The firm noted that it had initially envisioned a 10-percent drop month-over-month through May. However, with the West Texas Intermediate (WTI) crude oil price “clawing at $20,” Primary Vision now expects the number of frac spreads to “spiral down” to the 250-mark quickly – perhaps as soon as two weeks from now. A WTI in the teens could bring that figure even lower, the company added.

“This is reality,” Matt Johnson, principal of Primary Vision, told Rigzone.

Johnson said the earlier 10-percent frac spread decline prediction assumed that from 3,000 to 6,000 employees would be laid off in total by May 1.

“This would bring our frac spread count down to about 250 from 319 last week,” Johnson explained. “Our current model suggests that rigs drop down to about 400 to 500 – from approximately 800 – and frac spreads fall to approximately 200.”

A reduction in even one frac spread spurs a significant loss of jobs.

“We can have anywhere from 50 to 100 people when adding in all of the ancillary services needed to complete a well,” said Johnson.

To put the most recent 298-spread figure into perspective, Johnson compared it to corresponding periods in recent years:

  • Against the 401-spread figure on March 15, 2019, the latest figure is down by 103 units (26 percent)
  • The most recent spread count is down 31 percent – 133 frac fleets – from the March 16, 2018, figure.
  • It is down by a considerably more modest three spreads – approximately one percent – versus the March 17, 2017, statistic.

Although Primary Vision has observed corrections in all U.S. shale basins, Johnson noted the frac fleet departures appear most pronounced in the Permian, Marcellus and Utica.

“The Permian and the Appalachian are both seeing early declines,” he said.

In the case of the Permian Basin, Primary Vision had reported a range of 135 to 151 frac spreads in the region since the start of this year. As of March 13, 2020, the count had fallen to 127 – down approximately 15 percent from the 149 spreads the firm reported for March 15, 2019. Figures for the Permian in corresponding periods in the two preceding years are 144 in 2018 and 101 in 2017.

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