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IHS Markit Webinar Summary: “North American Onshore Services: Negative Sentiment Going Into 2020 Gives Way to Historic Chaos”

29 April 2020 David Vaucher

We recently released our latest research in the wake of ongoing OPEC discussions and the effects of coronavirus (COVID-19) on the global economy, which have combined to leave the oil market in an historic state of turmoil.

To help our clients gain further insights from our findings we organized a webinar held on Tuesday, April 21st where several experts delivered additional views on their respective coverage areas.

The key takeaway for each topic we covered is as follows:

  • Global industry trends: The IHS Markit Brent crude price base case assumes a low of about 10 USD/bbl in Q2 2020, reaching nearly 40 USD/bbl at the end of 2021. As a result of such sustained, low Brent prices we expect global upstream E&P capex to decrease 25% by 2021.
  • US production: We expect total US oil production to drop from 12MM bbl/day at the end of 2019 to 8.7MM bbl/day at the end of 2022.
  • Upstream activity: Our latest analysis shows spud count and frac count decreasing 76% and 42% respectively compared with our numbers published in February 2020 (Figure 1).
  • Upstream cement: We expect US oilfield cement demand to reach volumes 40% lower than those seen during the 2016 downturn; this has never happened since the beginning of the shale revolution.
  • Upstream water: The drastic decrease in drilling & completions (D&C) activity will drive water demand down by 46% in 2020, the biggest drop in the market since the shale revolution started; the significant decrease in D&C activity will only affect produced water volumes towards the second part of 2020.
  • Proppant: We project a 47% decrease in proppant demand from the end of 2019 to the end of 2020.
  • Pressure pumping: Total North American hydraulic horsepower (HHP) capacity dropped from about 24.6MM HHP at the end of 2019 to our current assessment of 23.4MM HHP. These figures are for total capacity, as we are expecting a dramatic increase in Q2 2020 of warm stacking and cold stacking of equipment, with Q2 2020 to Q4 2020 seeing dramatic cuts in overall capacity.

Figure 1:Comparison of rig and frac count from our last update in February 2020

Upstream services clients are welcome to contact us with questions and anyone else can schedule a time as short as one hour via our new ExpertConnect platform to discuss our insights. Book in a consultation with David Vaucher.

Learn more about North American Onshore Services & Materials.

David Vaucher is an Associate Director at IHS Markit.

Posted 29 April 2020

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