As 2025 looms near, service companies have begun planning for a new year and look to strengthen ways to stay ahead of the competition. This ebook delves deep into the factors that will shape the future— prices outlook, M&A’s impacts, OCTG and pressure pumping. It’s an essential guide for navigating the complexities of tomorrow and securing a place at the forefront of the oilfield service sector in 2025.
Enverus Intelligence® Research, Inc., a subsidiary of Enverus, provides the Enverus Intelligence® | Research (EIR) products. See additional disclosures.
Research written by:
Mark Chapman, Principal Analyst Research, Enverus
Oil & Gas Research Team, Enverus Intelligence® Research
Despite record oil production in 2024 and an impending gas boom in 2025, the oilfield supply chain has had a rough couple of years. Oilfield country tubular goods (OCTG) prices are off peak by as much as 50%, while sand prices have drifted lower. And the winners of this consumables downturn are drilling mud and cement, which are flat and up 7%, respectively. Rising tides have not yet lifted all boats. But we view the tide is indeed turning for oilfield consumables, drilling and pressure pumping services with a bottoming of activity in 2H24. Let’s delve into the market forces leading to reduced demand, the macro-outlook for oil and gas prices, and what to expect in what remains of this year and into 2025.
The wave of M&A in 2023 was driven by inventory hungry E&Ps buying privates who had an outsized portion of activity at the time as they try to prove up their acreage. The buyers desire to preserve inventory ended up laying down typically 20% of the acquired company’s rigs.
This consolidation has meant a greater portion of activity is in the hands of larger efficiency minded operators who leverage three-mile laterals and implement batch drilling and rig automation to yield a tremendous level of drilling efficiency never before seen in the industry. Pressure pumping operations are also more efficient, enabling by new state-of-the-art equipment capable of around the clock operations and requiring fewer frac fleets.
Enverus is defying the consensus with a more bullish $85 Brent base case. Demand wise, global oil consumption is set to increase by approximately one million barrels per day in 2025. Supply is expected to remain stable with OPEC’s winding down of cuts offset by members who have been outproducing their quotas. That being said, it’s the low levels of OECD stock inventories that are bolstering the $85 outlook (low $80 WTI) as inventory levels are historically correlated with oil prices, including the U.S. Strategic Petroleum Reserve which is about half empty.
Up to 7 additional Bcf of LNG demand is expected for Gulf Coast and Canadian exports through 2026. Upstream and midstream are preparing for the impending gas price rebound by strategically holding acreage in the Haynesville and building up takeaway capacity. Low to negative Waha prices have been the curse of the Permian for the past few years, leading operators to either flare natural gas and take the regulatory hit or pay to have associated gas hauled away. Those days are coming to an end with the recently opened Matterhorn Express, up to 2.5 billion Bcf per day of takeaway capacity is now online with additional pipeline on the way, such as the Blackcomb and Gulf Coast Express Expansion pipelines. Paired with the completion of multiple LNG facilities in 2025 and 2026 on the Texas and Louisiana Gulf Coast as an outlet for the supply. We believe the Haynesville is the marginal gas play that will swing production depending on natural gas prices go in beyond 2025 and beyond.
Given that operators were able to hit their production targets with 30% fewer rigs from 2022 to 2024, we can expect to see the trend continue through 2026 with increasing productivity and decreasing rig count. However, utilization remains strong overall for 1,500 horsepower rigs with approximately 80% utilization within the last twelve months. Super-spec rigs, which are almost exclusively contract, will continue to demand higher rates given their ability to drill three-mile laterals and achieve the efficiency factor that operators are reaching for.
So far in 2024, drilling rates have declined approximately 6% on contracts and 3.4% for daily rig rental. Headed into 2025 we anticipate contract prices to step down closer to the spot rental rate following tendering season and the start of new contracts on Jan. 1. And though the number of private E&Ps spudding new wells has dropped, this number should trend higher next year as private operators are putting positions together in tier-two acreage and non-core assets divested by the public E&Ps.
Looking ahead to 2025 and beyond, the oilfield service sector is set for significant changes. With the anticipated rebound in oil and gas prices, driven by strategic investments and technological advancements, companies can benefit from new market conditions. The outlook for Brent and the growing LNG export market suggests a path to higher margins. Now is the time for service companies to position themselves at the forefront of this dynamic landscape, leveraging insights and innovations to navigate the complexities of tomorrow. For a deeper dive into the opportunities and price outlook for the coming year, speak to an expert today.
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