Frac players feeling the pinch

The number of “frac spreads” in America’s shale basins have increased by 40 over the past three weeks and totals 315, according to Primary Vision LLC, which tracks the upstream industry’s hydraulic fracturing activity. Also known as “frac fleets,” frac spreads comprise the equipment a pressure pumper uses to perform a frac stimulation job to complete a well. In its Feb. 5 weekly, “Frac Insights,” Primary Vision states the recent 40-spread increase reflects “typical seasonality.” But the firm also observed that “rigs haven’t walked with spreads” to illustrate occasional divergences between frac spread counts and drilling activity. Matt Johnson, principal of PV, told Rigzone that the downstream O&G sector should exert its influence in the realm of frac spread activity throughout the first six months of 2020. “(T)here’s too much supply in the market of refined products, particularly gasoline,” he said. With pressure on demand, it could see operators slow down completions as they become unaffordable. Drilling appears to be in a “holding pattern.” Although pressure pumpers have had to contend with undesirable outcomes for about two years, the coronavirus is the most recent threat to a “potentially long-term" effect on O&G demand. Oil and natural gas liquids (NGL) production levels are rising. “The oil and NGL have to go somewhere,” said Tom McNulty, Houston-based manager of the Great American Group. Greater distillation capacity in the U.S. has produced higher-value distillates to sell internationally. Profitable distillates and jet fuel are taking more space in the refined products stack from gasoline, according to McNulty. Various development projects on the Gulf Coast – ports of New Orleans and Mobile, Ala. - will boost refined product export capacity, but the surge is largely bypassing Europe. “China and India are the largest consumers of exported U.S. refined products.” The demand in China will dip because of the coronavirus, McNulty believes it will rebound faster than many think. Also, the International Maritime Organization’s new “IMO 2020” low-sulfur marine fuel regulation will provide a “great opportunity” for refineries with more complex processing configurations. (Source: Rig Zone 02/07/20) https://www.rigzone.com/news/frac_players_feel_pinch_of_refined_products_glut-07-feb-2020-161018-article/