Baker Hughes Inc. expects North American exploration to increase through the rest of this year, lifted by the surge in Permian Basin development, which is showing no signs of slowing.
Baker executives discussed second quarter results on Thursday and offered rig count projections through 2014. There's more to come, said CEO Martin Craighead.
"We're seeing activity growth in the U.S. onshore market in the form of more rigs, more wells and more horizontal drilling," Craighead told analysts during a conference call. Demand for Baker well services "is at record levels, and not surprisingly, we've set record revenues in our drilling services and drillbit product lines."
Across the entire U.S. onshore, the "growth engine remains the Permian" Craighead said. "During the quarter, well counts in the Permian rose more than 10%, including an increased proportion of horizontal wells. Growth in the Permian is creating entire market conditions across all other basins," favorable "for all our product lines, particularly pressure pumping."
Baker also has a growing number of customers experimenting with longer laterals and higher volumes of proppant.
"As a result, our horizontal stages grew, our stage counts per well increased, and our pumping volumes per well also rose," said the CEO. "Due to this improving mix, and increasing utilization, we achieved higher revenue per stage across virtually every major basin in the United States.
"To be clear, our plans to transform our pressure pumping business is on track, and we continue to have opportunities to improve our margins from higher asset utilization and operating efficiencies." The pressure pumping turnaround contributed 60% of incremental margins between April and June.
Baker is forecasting the U.S. rig count this year should average 1,830, 4% higher than in 2013. Domestic onshore wells should increase by 5%, or about 37,300 new wells by year's end. The Canadian rig count is seen up 8% to average 380. The U.S. offshore rig count is expected to be flat. Baker has reported the 2Q2014's U.S. well and rig counts increased sequentially and year/year (see Shale Daily, July 11).
Technology, which Craighead said accounts for 35-50% of revenue, continues to be the Houston company's raison d'etre.
"Boosting production from shale is one of our customers' biggest challenges," Craighead said. Without continuous innovation, the company's revenues would stagnate.
"In North America, newly introduced well construction and production technologies, such as the Kymera hybrid drillbit and ProductionWave production solution, are seeing unprecedented demand resulting in record revenue in our drilling services, drillbits, upstream chemicals, and artificial lift product lines. The rising sales of these products, along with an increase in onshore and offshore activity in the United States, more than offset the seasonal decline in our Canadian business."
FlexPump Curve, unveiled on Thursday, is the first artificial lift engineered "to be deployed below the ever-tightening bend angles, which are common in unconventionals," said Craighead. "They are set in the horizontal section at the maximum depth and extension possible. Why is this important? Because the deeper you can set the pump, the higher the drawdown rate, resulting in higher production rates."
Baker earned $353 million net (80 cents/share) in 2Q2014 versus year-ago profits of $240 million (54 cents). Results also were higher from 1Q2014's profits of $328 million (84 cents). Revenue climbed to $5.94 billion from $5.49 billion in 2Q2013 and $5.73 billion in the first quarter.