(Reuters) - Oilfield service company Superior Energy Services Inc. on Monday said it will shutter its hydraulic fracturing unit, the second supplier this month to exit a business hammered by slower shale activity.
Last week, Basic Energy Services said it would sell most of its hydraulic fracturing equipment for between $30 million to $45 million, citing weaker activity and pricing that inhibited “the potential for positive free cash flow in the near- to medium-term.”
Oilfield service companies have been hard hit this year by weak oil and gas prices and spending cuts by producers shifting to focus on shareholder returns via cost-savings over production growth.
Hydraulic fracturing uses high-powered pumps to force sand, water and chemicals underground to release trapped oil and gas.
Consultancy Primary Vision Inc. estimates some 150 hydraulic fracturing spreads, which are used to complete oil wells, have been taken off the market since April.
Earlier this month, Superior said it was cutting 112 Pumpco jobs in West Texas. The company anticipates a $45 million pre-tax charge to earnings from a reduction in the value of its assets and will use proceeds from the divestiture to pay down debt, it said in a regulatory filing.
Pumpco had about 13 fracking spreads with roughly 650,000 hydraulic horsepower, while Basic had about 11 spreads with 500,000 hydraulic horsepower, according to Primary Vision.
“We are seeing the impact of the collapse of the Midcontinent’s drilling programs,” said Richard Spears, vice president of consultancy Spears & Associates, referring to oilfields in Kansas, Oklahoma, Louisiana and Texas. “The rest of the industry is so weak that there is no place to move frac equipment to where it could be employed.”
Oil production in the Anadarko Basin, which spans Oklahoma and parts of Texas, is expected to fall by 12,000 barrels per day this month to 551,000 bpd, according to the U.S. Energy Information Administration. The Eagle Ford shale in South Texas is also expected to suffer a production decline, according to the EIA’s latest Drilling Productivity Report.
Earlier this month, top fracking provider Halliburton Co closed its Oklahoma office and laid off hundreds of workers.
Spears said many fracking companies have been hurt by oil companies buying sand and chemicals directly from suppliers rather than from oilfield service firms.
“Taking those away from the frac service company evaporated the profits that allowed the service companies to reinvest in growth or survive a sustained downturn,” he said.
Reporting by Liz Hampton; Editing by Dan Grebler
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