Halliburton Looks to Keep Jacking Up Prices

by Matthew Johnson

Every company treated the recent downturn in oil prices differently.  For Halliburton, one of the top oil and gas service companies in the world, the strategy was to gather up market share at the expense of profits.  That strategy seems to have been executed.  Halliburton released its financial results for the Fourth Quarter of 2016 on January 23, and the company announced a staggering operating loss of $6.8 billion.  The company did gain market share, but it seems to have grown tired of hemorrhaging cash.  It has started increasing its prices in hopes of squeezing profits from the market share it has so painfully acquired.  The early signs are good.  In fact, the company announced that it returned to operating profitability in North America in the Fourth Quarter of 2016. With completions on the comeback, this is a HUGE STORY to CONTINUE FOLLOWING.

Time to Raise Rates?

In his Fourth Quarter earnings call, Halliburton CEO Dave Lesar made clear that the company hopes to raise prices on its customers in the coming months.  We have heard the company is tired of subsidizing operators, and it is rumored that in key basins the target price increases will be as high as 40%.  Mr. Lesnar said on the call that towards the end of 2016, Halliburton made a strategic decision to stop chasing market share at the expense of profits.

U.S. Frac Spread Count for HALLIBURTON

Customers Looking Elsewhere

Halliburton has the massive scale, experience, and assets in North American operations to weather a price battle.  One of its top competitors in North America, Schlumberger, reported a net loss of $204 million in the Fourth Quarter, and it reported a desire to raise prices as well.  One of Halliburton’s other leading competitors (and former proposed merger partner), Baker Hughes, spun off its pressure pumping division into a new private company called BJ Services and then suffered a massive loss of $417mm in the Fourth Quarter of 2016 as it finalizes its merger with GE Oil & Gas.  It is hard to predict where these companies are headed after these transactions.  The changing price dynamics could open some doors for smaller service companies, and we have heard many customers are feverishly looking into low-price alternatives.  This push for understanding pressure pumper activity has been coined “Operator Fever” here at Primary Vision.

Primary Vision Closely tracks Frac Demand

Keeping up with a dynamic market can be a challenge, but Primary Vision has developed a proprietary method for channeling the latest public and private data into models that approximate the real-time state of the market.  Our extensive data on hydraulic fracturing in the United States and Alberta, Canada is now available for subscription via A quarterly report or data subscription.  To learn more, visit www.fracspreadcount.com or contact us at info@pvmic.com.

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Disclaimer

The data presented above has a margin of error of 5-8% as a result of E&P and/or service company errors or incorrect data filings. Neither the information, nor any opinion contained in this site constitutes a solicitation or offer by Primary Vision or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.

Don’t Sleep on the Coloradan Frac’ers

by Matthew Johnson

If you list out the companies with the most frac spreads in 2016, you are going to be looking almost exclusively at the heart of oil country, Texas Oklahoma and New Mexico.  Just go right down the list and you will see the market share is dominated by EOG (based in Houston, Texas), Chesapeake (Oklahoma City, Oklahoma), Pioneer (Irving, Texas), XTO (Ft. Worth, Texas), Anadarko (The Woodlands, Texas), and on it goes.

If you break down the number of frac jobs completed last year, however, you can see that there are some fairly significant players basing their operations in Colorado.  Anyone keeping tabs on the business should watch these companies.  The energy business is in the Rocky Mountain region is succeeding and benefitting from Denver’s popularity.  It is routinely named among the fastest-growing cities and best places for business and employees.

Discovery Natural Resources

Discovery completed about 45 frac jobs in 2016.  It is a private oil and gas company headquartered in Denver.  Interestingly, even though it is based in Colorado, the company is currently focusing its efforts on the Permian Basin in West Texas.  The company touts over six million barrels of oil production per year from more than 1,000 wells covering nearly 120,000 acres of land.  The company has said that it is well poised to handle market downturns, and press reports back that up.  E&P Magazine reported last year that the Permian Basin was handling the drop in oil prices better than any other region and that Discovery has continued to drill and relentlessly optimize its operations.

Extraction Oil & Gas

Extraction Oil and Gas frac’ed 54 wells in 2016.  Like Discovery, Extraction is based in Denver.  But Extraction actually remains focused on producing in the Rocky Mountain region.  The company was founded in 2012 and highlights its work in the Greater Wattenberg Field of the Denver-Julesburg Basin (commonly called the DJ Basin).  The company just had its initial public offering in October 2016, and it was considered wildly successful at the time, however it appears that they’re experiencing some volatility as the calendar turned to 2017.  It raised more than $630 million at a share price several dollars higher than expected.  It was the biggest energy listing in the world since the oil price crash in 2014, and the company seems poised for future success.

Keep Track of the Marketplace

Data on frac’ing operations is typically cobbled together from months-oil public regulatory filings.  Primary Vision works to approximate real-time data by collecting public and private information and then applying sophisticated math models, advanced cross-validation algorithms, and artificial intelligence to fill the gaps.  Our extensive data on hydraulic fracturing in Colorado, Texas, Oklahoma and across the rest of the U.S. (plus Alberta, Canada) is now available for sale in our new National Frac Spread Count Report.  To learn more, visit www.fracspreadcount.com or contact us at info@pvmic.com.

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Disclaimer

The data presented above has a margin of error of 5-8% as a result of E&P and/or service company errors or incorrect data filings. Neither the information, nor any opinion contained in this site constitutes a solicitation or offer by Primary Vision or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.

Pumpco Stays Busy in Texas

by Matthew Johnson

You can get an idea of how service companies are dealing with a challenging environment by looking at our data on specific companies, like Texas-based Pumpco Services.  The company has consolidated its operations near its home and it appears to be thriving.

A Leading Pressure Pumping Service

Pumpco Energy Services, Inc. was founded in 1982 by Ronny Ortowski, who had worked for many years in pumping.  The company provides fracturing services, using its high-pressure pumping equipment to fracture rock formations.  It also offers acid and other treatment additives to enhance production.  Finally, Pumpco offers miscellaneous pumping services, such as pump downs between well completion states.  It brags that its focus on service and controlled growth sets it apart from other service companies.

When the shale boom took off, Pumpco became a hot commodity.  It was acquired by Complete Production Services in 2007.  At the time of the merger, Pumpco had an estimated revenue of $96 million and three pressure pumping fleets in the field, with one more on the way.  Complete Production was, in turn, swallowed up by Superior Energy Services in 2012.  The deal was reportedly worth approximately $554 million in cash.  Pumpco has continued to operate under its own name, however, as a subsidiary of Superior.

Consolidation and Stable Activity

Pumpco’s controlled-growth strategy was probably not controlled enough, as during the boom years it moved a significant operation into the Bakken.  That operation, based out of Minot, North Dakota, was forced to shut down in September 2015.  The company closed up its Bakken shop, laying off 70 people and simply stating that the decision was forced by “economic conditions caused by falling oil prices.”

Since 2015, Pumpco has operated almost exclusively in Texas, with some operations also conducted in New Mexico.  The company had A MAX OF six frac spreads running every week at it peak in 2015, but in 2016 it ran between two and four most weeks.  That said, the company seems to have had a good 2016.  It has had several months with as many as nine frac jobs per month, after never exceeding eight in 2015.  The trend lines suggest 2017 could be a good year.

Primary Vision Has the Details

Keeping abreast of industry trends can be made so much easier by subscribing to the encyclopedia of data developed by Primary Vision.  Service companies do not provide this data to the public in real time, or in some cases ever.  We have developed sophisticated methods for collecting the available public filings and private announcements and using sophisticated models to predict real-time data.  Our extensive data on hydraulic fracturing in the United States and Alberta, Canada is now available for in our new National Frac Spread Count Report.  To learn more, visit www.fracspreadcount.com or contact us at info@pvmic.com.

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Disclaimer

The data presented above has a margin of error of 5-8% as a result of E&P and/or service company errors or incorrect data filings. Neither the information, nor any opinion contained in this site constitutes a solicitation or offer by Primary Vision or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.

Macro View of U.S. and Canada Hydraulic Fracturing

by Matthew Johnson

Oil and gas production in North America has huge ramifications across the world economy, and companies in many industries can benefit from keeping track of activity in the oil field. The most common metric is the Baker Hughes rig count, but that only tells you how many drilling rigs are active in a given week. Companies can get a much more complete picture by knowing how many hydraulic fracturing operations, or spreads, are active in a given week.

U.S. Regional Analysis

When people think of the frac’ing revolution, they often think of the contentious debates over land use in Pennsylvania or the boomtowns of North Dakota. The real leader in frac’ing has always been Texas, though. The breakthrough in the unconventional revolution came in 1997 in Texas’s Barnett Shale, where Mitchell Energy engineers discovered that they could stop using expensive gels and instead use cheaper, more watery fracking fluid to crack open shale formations to get economic production of oil and gas. Recent data shows Texas has simply continued its domination.

The state of Texas holds more than 40% of the market share of spreads nationwide

As of January 1, Texas holds more than 40% of the market share of active spreads nationwide

Over 40% of active frac’ing operations, or “spreads,” are in Texas. North Dakota and Pennsylvania come in at 10% each, as does Oklahoma. Colorado has about 7% of active spreads, Ohio has 4%, West Virginia has 2%, and Wyoming has just 1%. Major oil producing states Alaska and California have very little activity on the fracturing side.

Looking at the Eagle Ford region in Texas, the data shows that the number of active frac’ing spreads has held steady this year, even as drilling has fluctuated. The number of drilling rigs continued its plummet caused by low oil prices all the way until the end of spring, and has crept up steadily since. The coming months could be very good for the region, where many openly celebrated OPEC’s recent decision to limit oil production. American frac’ers may benefit more than select OPEC members. The comeback looks to be slow and steady along with the accompanying production bump.

Frac Spread Count in Eagle Ford region

Frac Spread Count in the Eagle Ford region of Texas

Canada Analysis

Alberta, Canada is not all tar sands. Hundreds of wells have been frac’ed in Alberta in 2016, and the rate has been increasing over the summer and into the fall. The future of frac’ing in Canada is somewhat in flux, as it has both financial and environmental concerns. On the other hand, Canada’s largest driller, Precision Drilling, just announced it will spend 60% more on capex in 2017 than it did in 2016. While Canada’s recovery has been volatile, we look for pressure pumpers to demand more equitable terms while the market continues to stabilize.

Email us at info@pvmic.com for a free output of Frac Spreads in Canada.

Primary Vision Explains Oil Field Activity

Primary Vision has developed a proprietary method for collecting public and private data on frac’ing and then applying sophisticated math models, advanced cross-validation algorithms, and artificial intelligence to fill the gaps caused by industry secrecy and delayed reporting requirements. Our extensive data on hydraulic fracturing in the United States and Alberta, Canada is now available for sale in our new National Frac Spread Count Report. To learn more, visit www.fracspreadcount.com or contact us at info@pvmic.com.

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Disclaimer

The data presented above has a margin of error of 5-8% as a result of E&P and/or service company errors or incorrect data filings. Neither the information, nor any opinion contained in this site constitutes a solicitation or offer by Primary Vision or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.

Tracking the Lesser-Known Frac’ers

by Matthew Johnson

Frac’ing has not been dominated by the big names you might expect. The costly technique was driven to prominence by independent producers that had to find a way to do business profitably in the United States. This is evident when you look at data on the active pressure pumpers and well operators in the United States.

Don’t Overlook Smaller Pressure Pumpers

A typical hydraulic fracturing pumper unit includes a large engine, pump, and control panel that are mounted on a truck or trailer. The pumper is part of a frac spread typically run by a well operator that includes storage tanks and additive mixers. Major well operators like Chevron and XTO/ExxonMobil hire a number of pumpers, but they tend rely heavily on the big names: Halliburton, Baker Hughes (soon to shift to the new entity BJ Services), Schlumberger to name a few. This chart below shows just how active Halliburton is:

Independent operators do not hire as many pumpers, but they tend to be more diverse in their hiring. Anadarko, for example, also utilizes the pumping services of Trican, Calfrac, FTSI, Universal, and Nabors. Pioneer Resources is a bit of an outlier in the operating world, because they’re vertically integrated.

A frac’er to watch: Keane

One smaller pumper that is worth keeping an eye on is Keane Group Inc. The company is based in Houston and run by alumni of some of the major service companies. It is currently in the midst of an initial public offering that could be worth as much as $287.5 million, and it will lead to the company being listed as “FRAC” on the New York Stock Exchange. Keane is owned by a New York-based, private-equity firm called Cerberus Capital Management, and that has allowed Keane to stay well financed during the current downturn.

Keane Group reported in a recent filing that it has 944,250 horsepower behind 23 frac’ing spreads and wireline trucks operating primarily in the Permian, Marcellus, and Williston Basins. Other reports say that 13 of those frac’ing spreads were deployed as of November 30, 2016. Data collected by Primary Vision shows a maximum of seven Keane-branded spreads active at any one time during the past 12 months.

Some of the discrepancy is likely due to the fact that Keane doubled in size in 2016 through the purchase of the U.S. operations of the Canadian service company Trican. Keane seems to be counting some of its spreads while they were still branded as Trican, and some downtime is inevitable during a merger. Looking forward, Keane says it will use proceeds from the IPO to repay debt and create working capital, and it is possible the company is positioning itself to buy additional equipment as the market turns upward. Does it make sense for Keane Group to step in and purchase Weatherford’s pressure pumping division?

This Data And More From Primary Vision

If you want to be successful in the frac’ing business, it helps to know what the pumpers are doing. Primary Vision’s new National Frac Spread Count Report can provide both top-line data on the industry and detailed data on specific companies and markets. We have collected data from a range of public and private sources and then augmented that data with our own analysis to provide a clear picture of the hydraulic fracturing happening in the United States and Alberta, Canada. To learn more, visit www.fracspreadcount.com or contact us at info@pvmic.com.

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Disclaimer

The data presented above has a margin of error of 5-8% as a result of E&P and/or service company errors or incorrect data filings. Neither the information, nor any opinion contained in this site constitutes a solicitation or offer by Primary Vision or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.

Rig Counts vs. Frac Spreads vs. Frac Jobs

by Matthew Johnson

When you are trying to decipher what is going on in the oil field, getting your terminology right is important.  Analysts looking at unconventional oil and gas production have a few metrics that are updated frequently, lets go over them one by one.

Rig Counts

Perhaps the best-known number in the oil business is the Baker Hughes rig count.  Baker Hughes is an oil field service company that has been issuing counts of active drill rigs since 1944.  To be “active,” a rig must be on location and turning to the right.  In other words, a rig is active from the initial cut into the ground until it reaches its target depth.  A rig is not active if it is just moving between locations, being set up, or being used for a non-drilling activity.  Non-drilling activities can including testing, workovers (which can include running a drill through an existing well), and completions (preparing an already-drilled well for production).

The Baker Hughes rig count is a prized data point because it provides a rough proxy for the amount of drilling being done at a particular time.  Analysts from all corners of the industry use the data to predict things like future production and drilling equipment needs.

Frac Spreads and Frac Jobs

A frac spread is the collection of equipment needed to hydraulically fracture a well.  This typically includes a combination of pumps, data trucks, storage tanks, chemical additive units, and blenders.  Frac spreads (and sometimes they are referred to as Frac fleets) conduct frac jobs.  A frac job typically takes a handful of days, and involved pumping fluids down a drilled well at a high pressure to fracture the rock below to allow oil and gas to flow into the well.  Frac’ing fluids typically include sand, which acts as a “proppant” to keep the fractures open.  After years of explosive growth, The tOTAL Number of frac jobs have slowed down over the last two years.  2017 looks to reverse the recent trend as operators try to lock in the recent crude market upswing.

In a sense, a count of active frac spreads and frac jobs is very similar to an active rig count.  The numbers do not always align, however. There has been much talk since the recent downturn about the “fraclog,” for example.  This is a backlog of wells that have already been drilled but have not yet gone through the costly frac’ing process.  A company that sells proppant sand, for example, should be far more interested in the number for frac jobs than the number of active drilling rigs.  As you can see in our chart that compares the two data points, counts of active rigs and active frac spreads don’t always follow each other.

National Frac Spread Count Report

The challenge with counting oil and gas industry activity is that the companies involved are not always particularly forthcoming.  Widespread frac’ing is also a relatively new phenomenon, which makes it difficult to track and predict.  Companies are often required by regulators to submit data about their frac’ing activities on a quarterly basis, so robust data is usually available but lags behind current conditions by many weeks.  In order to provide a useful count of active frac spreads and frac jobs, Primary Vision has developed a proprietary technique for collecting available data and utilizing modern math models, advanced cross-validation algorithms, and artificial intelligence to estimate frac’ing activity.

After many months of perfecting our models, Primary Vision is now providing customers with a weekly Frac Spread Count Report.  It provides a combination of important top-line data with granular activity details that can be invaluable to industry players.  You can subscribe to our report at www.fracspreadcount.com.  If you have questions about our products or would like a demonstration on how they can help your business, please feel free to contact us at info@pvmic.com.

Disclaimer

The data presented above has a margin of error of 5-8% as a result of E&P and/or service company errors or incorrect data filings. Neither the information, nor any opinion contained in this site constitutes a solicitation or offer by Primary Vision or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.

Introducing the National Frac Spread Count

by Matthew Johnson

Oil prices are inching upwards, and if you want to make the most out of the opportunities in unconventional oil and gas production you need to know the lay of the land.  Primary Vision has just the product for you.  We leveraged our computing, qualitative analysis, and artificial intelligence capabilities to create an encyclopedia of frac’ing data on operations across the continental U.S. and Alberta, Canada.

Primary Vision Background

Our market intelligence and counseling company has been supplying data and data derivative products to the oil and gas industry since 2012.  We strive to give our customers the information they need to find markets, lower their costs, and raise their revenues in this challenging marketplace.  Our customers come to us to know what is happening in the oil field, and we give them a range of value-added data on the use of water, proppant, and chemicals in hydraulic fracturing.  Oilfield data is, of course, invaluable to upstream companies but it also impacts companies throughout the value chain.

That is why our Products have been trusted by leading companies from a diverse range of sectors, including Schlumberger, BP, Bloomberg, Shell, PWC, Phillips, HSBC, Cameron, Honeywell, XTO, EOG, and DuPont.  Proppant companies have used our reports to gain intelligence about their market, hedge funds have used our data to augment their own analysis of publically-traded companies, and private equity firms have used us to study a handful of Permian Basin counties for future investment.

Methodology Behind our Latest Report

In developing our reports, we target only the richest oil and gas data sets.  Our software tools and validation process are proprietary, but we can say that we rely on collecting a broad swath of industry reports, regulatory filings, and publicly-released information.  The biggest challenge with this data is that operators and pumpers in most locations make regulatory filings only every 90 days or so, and there is often a delay in that data becoming public.  We strive to close that Data lag with our own predictive model.

Our model relies on collecting data from a range of industry sources and rigorously testing it through business rules and logic to ensure our data sets and forecasts are as accurate as possible.  Our proprietary system was developed by a team of leading crude oil analysts paired with professors at Oxford University.  We are using modern math models, advanced cross-validation algorithms, and artificial intelligence to constantly test and refine our process.

Along with developing these massive data sets, we work on presenting the data for our clients in the most useful way.  We have charts that combine actual spread data with our predictive algorithm, and we also have charts that break actual data from predicted data.  We find some clients want our best estimate at what is happening and others want to see a breakout of what activity is confirmed.

National Frac Spread Count Report

Our recently-released Frac Spread Count Report is one of the most comprehensive products we have ever Released. Demand has been off the charts, as we combine easy-to-read top-line charts with more than 400 pages of more granular data.  You can subscribe to our report at www.fracspreadcount.com.  Subscribers get both a weekly update on the frac spread and access to historical data.  If you have questions about our products or would like a demonstration on how they can help your business, feel free to contact us at info@pvmic.com.

Holiday Presents to Frac’ers

by Matthew Johnson

   It has been a rough couple of years for the oil and gas business.  Oil prices dropped sharply in recent months as America’s boom in unconventional production ran headlong into supply headwinds, but the once-mighty Organization of Petroleum Exporting Countries has done American producers a favor this time.  On November 30 the group announced its first cuts in eight years which would reduce its production by about 1.2 million to 32.5 million barrels per day.  The cuts were something U.S. oil workers have been hoping for, and oil prices have indeed shot up and set the industry up for a great new year.  Let us tell you about a couple developments we are watching and a potential stocking stuffer for the frac’er in your home.

Baker Hughes Backs Out of the Pressure Pumping Business

  In 2009, Baker Hughes, a GE company, purchased Houston-based BJ Services Co. for $5.5 billion dollars.  B.J Services was an oil and gas services company that traces its roots back to 1872 and by the time it was purchased it was one of the world’s leading providers of oilfield pressure pumping services.  Baker Hughes bought the company to expand its footprint in the frac’ing business, but the deal proved to be a financial drag.  Its frac spreads went from a peak of around 50 in 2015 to just 10 earlier this year, though they have come back some recently.

chart1

Baker Hughes Frac Spread Count Since May of 2015

    Baker Hughes is now in the midst of a merger with a unit of General Electric and on November 29, Baker Hughes announced it was spinning off its BJ Services assets. Baker Hughes is partnering with CSL Capital Management and West Street Energy Partners to create a “pure-play North American land pressure pumping company” known as the new “BJ Services.” It will be interesting to watch how aggressive Halliburton and Schlumberger are in trying to snap up more market share away from this new entity.

Signs of Rock Bottom for Weatherford

   Weatherford International has taken the downturn especially hard.  Back in April 2015 the company kicked things off with 10,000 layoffs and 60 facility closings.  The company was doing okay in the Middle East, North Africa, and Asia Pacific at the time, but its North American assets were hemorrhaging money.  By October 2015, the company was ratcheting up to laying off 14,000 worldwide after its revenue was cut almost in half from $3.9 billion in the third quarter of 2014 to $2.2 billion in the third quarter of 2015.  By November 2016, the company’s CEO Bernard Durok-Danner was out of a job, leading to a 33% spike in the company’s stock price.  He was blamed for over leveraging the company to the point where it could not handle its debt after an oil price decline.

   Now, new CEO Krishna Shivram has been scaling back its frac’ing operations and may get out of the frac’ing business entirely.  If true, that will be a boon for the remaining service providers.  The company’s frac spread count cratered in the downturn and has been hovering below ten for most of the year.  The company may have arrived at a point where it decides to focus on other parts of its diverse portfolio.

Weatherford Frac Spread Count Since May of 2015

Get Your Primary Vision Frac Spread Count Report

   If you want to make money in the oil business right now, you need to know who among these battered rivals will rise from the downturn to take advantage of OPEC’s gift. Halliburton remains dominant at ~34% of the pressure pumper market, while Schlumberger sits at 12%. Baker Hughes 9% market share will presumably all go to the new BJ Services while Weatherford’s 5% appears to have an uncertain future.

A portion of a chart that covers pressure pumper market share from our Frac Spread Count Report.

   You can be the first to know what happens with our inaugural Frac Spread Count Report. We have been tracking onshore frac’ing activity for five years and now we are releasing our first report about active operators and pressure pumpers in the lower 48 states and Alberta, Canada. It is over 500 pages long and includes the count plus our expert forecasting, analysis, heat maps, details on regional activities, and charts on Permian Basin action. We also list out the top operators, service companies, and active counties.

You can GET the report today at: www.fracspreadcount.com

Questions? Email us at: info@pvmic.com

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Disclaimer

The data presented above has a margin of error of 5-8% as a result of E&P and/or service company errors or incorrect data filings. Neither the information, nor any opinion contained in this site constitutes a solicitation or offer by Primary Vision or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.

Does #Exxon Know The Value of Its Assets?

by Matthew Johnson

In recent months, ExxonMobil has been under fire after investigative reporters claimed the oil and gas giant knew about risks associated with climate change since at least the 1970s and hid that knowledge from the public.  Leading environmental groups called for the company to be prosecuted the way tobacco companies were prosecuted for hiding Smoking risks.  Mainstream politicians like Hillary Clinton joined in and New York Attorney General Eric T. Schneiderman launched an investigation.  In March 2016, attorneys general from 18 jurisdictions announced they are now part of his effort. In September 2016, the Wall Street Journal reported that AG Schneiderman had changed his aim and is now looking more closely at how Exxon values its assets.  The federal government has also launched a similar effort.

In addition to climate questions, the government wants to know if Exxon is hiding the damage it has suffered from low oil prices.  As our proprietary data shows, frac jobs decreased 50% from Q42015 to Q12015, and that foretold a corresponding drop in production and cash flow.  ONE THING TO NOTE IS THAT PRIMARY VISION’S DATA FOCUSES ON NORTH AMERICAN FRAC’ING AND THE MAJORITY OF EXXON’S BUSINESS IS INTERNATIONAL/OFFSHORE.

The Good:

First off, ExxonMobil is a pillar of American industry that traces its lineage back to the Standard Oil Trust that dominated world oil markets in the late 1800s.  The company has survived a lot of legal issues in its past, and when crude markets rebalance (or if OPEC is able to boost oil prices) then Exxon’s troubles may disappear.
This particular controversy has to do with the process executives use to sign off on calling reserves “proven” after reviewing data from engineers, geophysicists, and geologists.  Dropping oil prices and costly regulations reduce the value of these “proven” resources.  Most companies will write down that lost value, but write-downs reduce profits.  Exxon is notorious for refusing write-downs.  Exxon CEO Rex Tillerson sees this aversion as a good part of the company’s culture.  He says it avoids write-downs by placing a high burden on executives to ensure that projects can work at low prices.  Those executives will not be “bailed out” by having their projects written down in a bad market.

One thing that helps make this strategy viable for Exxon is that its operations are heavily centered in areas that continue to be economic at current prices.  In particular, this means the Permian Basin in Texas, and through it subsidiary XTO Energy the company also reaches the Williston Basin in North Dakota.  Our data shows these to be the most popular locations for frac jobs in recent years.

The Bad:

The flip side here is that Exxon could be seen as lying about the cost of climate or its losses associated with low oil prices.  The company has outperformed many of its rivals since oil prices began to drop in 2014, but it has lost money in its U.S. drilling business for the past six quarters.  By failing to admit that their reserves had lost value, Exxon was able to report higher earnings than rivals that made significant write-downs.  Some may say the company inflated its earnings to boost its stock price.

The Ugly:

Exxon is now facing two different investigations with overlapping aims.  First, New York AG Schneiderman and his coalition are pursuing allegations of fraud related to climate change.  AG Schneiderman also appears to be independently reviewing Exxon’s practices related to writing down assets and accounting for the cost of climate change.  Second, the U.S. Securities and Exchange Commission has now opened up an inquiry into the same issues of write-downs and climate accounting.

Conclusion:

Exxon has been on the attack against AG Schneiderman and what the company views as a politically-motivated attack, but Exxon has said the SEC is the “appropriate entity” to look into these matters.  Exxon is proud of its practices and it will likely hold up against government scrutiny as it has for decades.  History suggests commodity prices will rise again, and when they do Exxon’s troubles will seem minor.  Moreover, these investigations were just a chink in Exxon’s armor.  Stock prices took only a small dip after the SEC investigation was announced, and analysts like The Street Ratings still consider the stock a “hold” as the company is in a solid financial position despite weak cash flow and poor profit margins.

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Disclaimer
The data presented above has a margin of error of 5-8% as a result of E&P and/or service company errors or incorrect data filings. Neither the information, nor any opinion contained in this site constitutes a solicitation or offer by Primary Vision or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.

Pioneer’s A+ game might match OPEC

PXD-PVby Matthew Johnson

Recently, we reviewed some pressure pumpers and even took a stab at Eog Resources (EOG: $91), often called the Apple ($108.27) of U.S. shale.  If Eog Resources is the Apple of U.S. Shale then is Pioneer (PXD: $224) the Uber-equivalent?  Their CEO, Scott Sheffield, stated last week that their operating costs in the Permian Basin were close to $2 per BOE. Some have disputed this by looking deeper into their financials.  Let’s take a look at what we’re good at which is frac jobs and frac spreads.

We’ve reported 440 frac jobs since the beginning of 2015 running through Q1 2016.  PXD has shown a steady flow of work.

Pioneer is vertically integrated, so they do a lot of their own pressure pumping. However, we are tracking some activity with Halliburton (HAL: $43.84), Baker Hughes (BHI: $49.76) and Schlumberger (SLB: $81.20) in the last 18 months.

Here’s their top ten frac jobs by county since January of 2015:

The majority of their activity takes place in Midland (Permian), Upton (Permian) and Karnes (Eagle Ford) counties.

Pioneer has been a technological leader in many aspects of frac’ing including well selection, pressure pumping  and refrac’ing.  The inclusion of their own pressure pumping team gives them a logistical and financial advantage over 90% of E&Ps in the United States.  Even if their CEO is exaggerating, it appears as their operational costs have shined a light on investors (their stock is up 40% since January of this year) and other shale companies that the impossible is, in fact, possible.  If OPEC’s goal was to knock U.S. shale offline they may have won some battles, but companies like pxd are tenacious.  The war is far from over.

sources:
Arthur Berman at oilprice.comPioneers $2 Operating Costs: Fact or Fiction?
Rachel Aldrich at The StreetPioneer Natural Resources Stock is the ‘Chart of the Day‘”
Nicholas Chapman at Market RealistAnalyzing Pioneer Natural Resources Q216 Earnings

Disclaimer
The data presented above has a margin of error of 5-8% as a result of E&P and/or service company errors or incorrect data filings. Neither the information, nor any opinion contained in this site constitutes a solicitation or offer by Primary Vision or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.