In Other News… Midland Over Riyadh, Cudd Comeback & New Fleet, Cold Weather Scapegoat, & more…

Some big (and small) public companies have made announcements over the past few days that you should know about if you work in OFS, sand or other shale supply chain roles.

Here’s a quick rundown of 8 key company disclosures:


Midland Over Riyadh

Today, Saudi Aramco press released a suspension of their multi-year growth plan in oil production capacity. They announced that they now plan to hold at 12mmbpd instead of growing to 13mmbpd over the next couple of years as previously signaled.

This is a big negative in the international OFS growth story, which investors have been buying into during the recent shale stall.

It’s also a distinct positive for NAM tight oil basins (and NAM OFS businesses) as it a) gives the macro outlook a boost (good for the long-term WTI price outlook), and b) could increase investor interest shale-focused equities.

The news had a big impact in today’s trading on Wall Street, driving a performance wedge into the OFS stocks where NAM focused names strongly outperformed international ones. For example, as of this writing, Liberty’s stock was up 7% while Schlumberger’s was down 9%, a massive 16% spread with SLB giving up about $6bn of market cap during intraday trading. Most of the frac service company stocks were up big today.  Meanwhile, oil traders welcomed the news and WTI prices improved (now approaching $80/bbl) on the news, economic growth, and mid-east conflict datapoints.


Cudd Pressure Pumping Bucks The 4Q Decline (As Expected), Orders A New Tier 4 Fleet For Replacement

The company reported earnings last week and here are a few key points:

          • 4Q revenue was up 19% q/q
            • as a reminder, they had a very poor 3Q and were the only public frac company we were expecting to buck the sequential decline trend in 4Q23
            • that said, the bounceback was less than they had guided to (also as we expected) due to yr-end slowdown
            • Pressure pumping was 47.2% of revenues, downhole tools 23.3%, coiled tubing 9.4%, cementing 6.5%, and rental tools 4.4%. Together, these top-five service lines accounted for 91% of reported revenues of $394.5mm.
          • 1Q24 revenue and profit guided flat to up (no huge increase or decrease relative to 4Q)
            • Noted they were able to achieve more attractive prices in 4Q after foregoing some jobs on price in 3Q
            • Currently, they have their 10 horizontal fleets plus their two vertical fleets staffed
            • Noted January weather has been “a challenge” and some E&P customers got off to a slow start
          • They announced a newbuild Tier 4 dual fuel fleet order that they expect to put to work by mid-year
            • they say it will replace a Tier 2 diesel fleet (i.e. net neutral to industry capacity)
            • With the addition of this Tier 4 DGB fleet, they will have three in total, plus two Tier 2 DGB fleets and three Tier 4 diesel fleets. Additionally, they are operating two Tier 2 diesel vertical fleets. So, in total, 8 of their 10 horizontal fleets will be ESG friendly.
            • They said they remain on the sidelines with respect to electric fleets until there are solutions they “feel make economic sense for our business and customers.”
          • Said they are frac’ing in the MidCon, Eagle Ford, and Permian now


Helmerich & Payne’s Modest Rig Count Outlook

On the company’s earnings call today, they said their exit rig count in the December quarter was below their expectations at 151, but they have already picked up a few and expect to end the March quarter between 154-159 (we’ll take the high end) and they only expect modest rig count growth in fiscal 2024. More confirmation that consensus rig count expectations seem pretty modest at this point in time.


Baker Hughes Unexcited About Shale Growth In 2024

Key quote from their CEO on the earnings call last week:

“In North America, activity continues to lag, and we are now anticipating no meaningful recovery in activity during the first half of the year. On our last quarterly call, we expected 2024 North American D&C spend to be flattish but now expect spending down in low-to-mid-single digits, driven by mid- single-digit declines in US land.”


CNX Confirms Slower Capital Investment

CNX held their earnings call last week and shared 2024 total budget guidance of $575mm – $625mm for 2024 (down from $679 in 2023). They also reiterated that capital invested will continue to decline next year, and gave a preliminary 2025 capex budget target of below ~$500mm. On the call they said they’ll invest lower capital in completions in 2025.


Permian E&Ps Begin To Blame Cold Permian Weather For 1Q24 Production Shortcomings

This week, Permian E&P Ring Energy said that deferred production from recent severe cold weather in the Permian hurt their January production by 1,900 Boe/d for 10 days. They did note that production has since been restored. They also said they’ll spend $37-$42mm this quarter and are running a phased two-rig program (one horizontal and one vertical) to drill four to five horizontal weels and four to six vertical wells this quarter.


Murphy’s 2024 Eagle Ford Development Plan

Murphy has earmarked a 2024 capital budget of $320mm for the Eagle Ford Shale to support a program of bringing online 19 operated wells, primarily in Catarina, as well as 18 gross non-operated Tilden wells. Additionally, they plan to drill 11 operated Karnes wells, which are scheduled for completion in early 2025. They recently contracted a new high spec drilling rig from Patterson-UTI and are pleased with the first well drilled and looking for rig efficiency gains this year. They noted they entered 2024 without any wells to complete early in the Eagle Ford, so will swing to completions after building some early-year inventory to frac.


Permian Resources Gives Us The Latest Datapoint In A String Of E&P M&A Deals

Permian Resources just press released a series of recent portfolio optimization transactions consisting of two bolt-on acquisitions, a sizeable acreage swap, a divestiture of non-core assets and additional grassroots acquisitions.

The deals include Eddy County NM acerage purchase from undisclosed sellers for $175mm. They also swapped some acerage to bolster their Lea County, NM position and plan to begin developing the new acreage this year. And they exited the Eagle Ford position inherited in the Earthstone acquisition for $67mm.

More details in the 1/30/24 announcement.

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