A few quick observations from Tuesday and Wednesday.
- The Permian looked bad and Oklahoma looks a whole lot worse.
- This probably comes as no surprise to industry friends as the Mid-Con rig count contraction over the past two years has been steep.
- Yesterday, we drove from Midland to Canadian via Gardendale, Andrews, Seminole, Denver City and Levelland.
- We didn’t see a single working well service rig on that drive.
- For Permian veterans, this is nothing short of amazing as there are several really big fields in this area.
- We took a couple videos which we’ll eventually post, but they show a whole bunch of pump jacks and no rigs in sight.
- The drive in Oklahoma took us by two sand mines just west of Watonga.
- One looked shut down, the other had pick-ups and employees on site, but no sand haulers on location.
- Perhaps this is a reflection of only two frac fleets presently running in Oklahoma, a comment from multiple industry contacts.
- We don’t want to rub salt in any wounds as we fully appreciate the market is awful and executives who receive this email have had to make many tough personnel decisions.
- We feel really bad for all of you as that’s a whole lot of stress.
- That said, the numerous abandoned yards in El Reno really is a sight to see.
- Many of these facilities are relatively new.
- In several cases, the properties have for sale/lease signs out front.
- This tells us the companies aren’t planning on coming back anytime soon.
- Again – actions have consequences. If the Mid-Con were to fire up in a couple years, people won’t be here to service the E&P needs.
- Can you say higher service costs?
- We also went down to Duncan.
- We love Duncan.
- This drive is an annual ritual for us.
- We go down to look through the fence at HAL’s manufacturing facility.
- We stare in awe and desire, much like a little kid looking through the window of a candy store.
- We really want to go in, but we can’t. We’re not allowed.
- Also, there’s security around the perimeter and we’d probably be shot if we tried.
- Nevertheless, this is an impressive facility and represents HAL well. We’ll explain in a minute.
- As most readers have probably seen, there is a drone shot of stacked equipment in the HAL yard.
- It looks like the North Korean army marching in formation. Extremely well organized.
- We didn’t take this photo as we don’t have a drone.
- If subscription revenue rises, we might buy one.
- What we do have is a teenager who can take videos while dad drives.
- He also taught me how to send a video on WhatsApp.
- There are two things to know about the HAL Duncan operation.
- First, there is another stacked yard across the street from the main manufacturing facility.
- It is also full of equipment and not visible on the viral photo being circulated on LinkedIn and elsewhere.
- When you see all this equipment, one really walks away with an appreciation of just how BIG HAL really is.
- But what’s more important to us is not the sleezy photo ops or the significant volume of equipment, but rather how well maintained the equipment is.
- We have driven by multiple facilities this week and except for one small private company, nothing looks as good as HAL.
- We didn’t see a single missing fluid end or frac trailer with missing component parts.
- The equipment is uniform with consistent marketing and paint schemes.
- It looks clean.
- Perhaps a leap on our part, but it tells us they run a good operation and they don’t take short cuts.
- This is not the case with certain competitors who have aggregated equipment over the years and now have a rainbow fleet of trailers.
- Went by one competitor in Odessa and saw some blue units, some red units and then some red/blue units. Think that deal closed some time ago.
- In the panhandle, we met with an established player.
- Not naming the service to be discrete.
- This company’s utilization is ~20%.
- Limited E&P’s play in this market and there is only one who has not shutdown.
- Pricing for this player is the lowest it has ever been.
- Primary customer pays in 90 days, but at least they pay.
- Despite a really crappy market, our contacts remain upbeat.
- They are tough and are willing to tighten their belts to survive.
- This is what we love about the business – great people.
- Two days left on the trip. More to follow.
- Hope everyone is well.
- Time to go watch some NBA game from over 10 years ago. Anyone remember Jason Kidd?
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