Basic Energy Services Inc. reduced its U.S. onshore stimulation services prices by 25-30% in February, 10% higher than concessions it already had made early this year, CEO Roe Patterson said Friday. The workforce is down by 14% since November and 1Q2015 revenue is forecast to be about 10% lower than previous guidance.
The challenging onshore operating environment has led the company to react "quickly to our customers' requests for lower pricing for our services," the CEO said. "Stimulation services pricing concessions have increased to 25-30%, which is up from the 15-20% range we experienced earlier in the first quarter. Pricing concessions for our other services remain consistent with what we reported in our January operating update," (see Shale Daily, Jan. 12).
Last month, Patterson said the onshore oilfield services market had become chaotic, with vendors offering deep pricing concessions to maintain market share (see Shale Daily, Feb. 23). Basic provides well site services to more than 100 points in Texas, Louisiana, Oklahoma, New Mexico, Arkansas, Kansas, and the Rocky Mountain and Appalachian regions.
"We continue to maximize utilization and protect market share with rate reductions when and where possible," the CEO said. "We continue our efforts to reduce costs and scale down our operations to match customer activity. Negotiations to lower costs for sand, chemicals, fuel, supplies, etc. with our vendors and suppliers are ongoing, and we continue to make progress.
"Preserving liquidity is our main focus and our efforts to reduce capital spending have been successful. Our headcount is now down by 14% since its peak in November 2014 and we continue to adjust personnel costs to mitigate pricing concessions."
The Fort Worth, TX-based operator's well servicing rig count remained unchanged in February from January, but drilling rig days fell more than 10%.
The well servicing rig count in February was flat at 421, with 50,500 rig hours, resulting in a utilization rate of 55%, versus 56% in January. In February 2014 the rig utilization rate was 71%. Drilling rig days last month totaled 213, producing a rig utilization rate of 63%, versus 74% in January and 78% in the year-ago period.
Rig utilization rate is based on the weighted average number of rigs owned during the periods being reported, a 55-hour work week/rig and the number of weekdays in the periods.
Basic's fluid service truck count last month fell by five from January to 1,049. Fluid service truck hours totaled 184,100, down from January's 208,100. In February 2014, Basic reported 189,000 hours.
Freezing weather in the Permian Basin and Midcontinent contributed to the shortfall in business. The contraction in the market also was evident.
"February operating activity was affected by severe weather conditions in the last week of the month, particularly in our Permian Basin and Midcontinent operating areas," he said. "Weather impact in February reduced well servicing utilization by approximately 600 basis points and fluid service hours by 5%.
"Icy conditions also prevented several of our stimulation crews from reaching job locations, resulting in the loss of approximately one day of activity. Furthermore, the decline in contract drilling utilization reflects our customers' reduction in drilling plans."
To date in March, "adverse weather has affected activity...throughout our footprint. With the weather impact we experienced in February, and so far in March, combined with the increase in price concessions for stimulation services, we now expect first quarter revenue to be 32-34% lower sequentially compared to our previous guidance of 21-26% lower."