US shale sector steps off the gas
17 Aug 2012
London - A combination of lower North American natural gas prices and relatively high oil prices prompted an industry shift from gas to oil and liquids-rich shale formations, Weir Group has reported
US horizontal gas-focused rig count declined by 31%, while the oil and liquids rig count increased by a similar percentage, said Weir, which supplies pumps, flow control and wellhead equipment to the sector.
These trends – along with service company start-ups and high levels of forward ordering in late 2011 – have created substantial excess frac pump capacity in North America, the UK group added.
Aftermarket activity has also been impacted, as utilisation fell as a result of this overcapacity, as well as increasing equipment wear life due to lower pressure oil rich basins and changes in customer operating procedures.
“This led to material overstocking of certain aftermarket components, reducing short term demand, which in recent months has resulted in a more competitive environment for these products,” commented Weir.
The group said its pressure pumping focused operations - Weir SPM, Weir Mesa and Weir Novatech - had reduced workforce sizes and operating costs to protects margins and profitability at the lower activity levels.
