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  • Roger S. Conrad

Oil-Field Services: Underappreciated Strength

By Peter Staas on Feb. 14, 2014

To achieve its promised margin expansion in North America, Baker Hughes will rely heavily on the same “self-help” measures that drove sequential improvement in pressure-pumping margins across all four quarters last year.  

Baker Hughes has lagged Halliburton and Schlumberger in terms of converting its pressure-pumping fleet to 24-hour operations, a transition that involves staffing challenges and ensuring that these units are properly supplied and maintained in an efficient manner.

According to Craighead, about 55 percent of Baker Hughes’ hydraulic fracturing fleet is 24-hour capable, suggesting that less than half its rigs operate continuously. Baker Hughes aims to convert 70 percent of its pressure-pumping fleet to 24-hour operations by the end of 2014.

Not only do hydraulic-fracturing units capable of operating for 24 hours fetch a bit of a premium in the market, but the associated efficiencies also boost the service provider’s profit margins.

As exploration and production companies seek to reduce costs and boost recovery rates, technological innovation in services and equipment will be critical to helping customers meet these goals.

If oil-field services firms can demonstrate that these product offerings will generate a higher total return for customers, the industry should be able to push prices on these solutions.

In Baker Hughes’ fourth-quarter earnings call, Craighead highlighted the success of the company’s ProductionWave, an artificial-lift solution launched last year that has experienced strong uptake in all the major shale basins.

This innovation combines the firm’s new CentraLift FLEX electrical submersible pumps with production chemicals and remote monitoring to stem the steep decline rates exhibited by unconventional oil and gas fields.

A test of this technology in the Bakken Shale led to a 35 percent increase in oil production, compared to traditional artificial-lift solutions, which are prone to mechanical failure and designed to operate in conventional basins.

Management cited robust demand for ProductionWave in shale plays with higher gas content and indicated that the services firm had installed hundreds of units in the fourth quarter.

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    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor