The North American drilling services market is tight and getting tighter, squeezed by increased activity in liquids-heavy and emerging shale oil plays, Baker Hughes Inc. CEO Chad Deaton said last week.

The Houston-based company plans to roll out more hydraulic fracturing (fracking) equipment across the United States and Canada in the last six months of the year, but it may not be enough to handle demand, he said.

“In North America, on land, overall spending levels have increased as incremental spending on oil and liquids-rich natural gas plays has more than offset weakness in dry gas plays,” Deaton said. “The rig count in Canada is already dominated by oil-directed drilling,” noting that for the week ending April 22, “for the first time since 1995, the U.S. has more rigs drilling for oil than natural gas.”

COO Martin Craighead told analysts that Baker Hughes is “heavily backloaded in the second half of the year” for equipment and chemical orders but “we fully expect to deliver what we have budgeted.”

Based on business to date the oilfield services operator now expects that there will be 2,180 oil and gas rigs operating in North America this year, up from a December 2010 forecast of 2,080. The U.S. number, as well as the Canadian number, both were set 50 rigs higher for the year. The increased rigs will be oil-heavy, said Deaton.

“Service intensity in the unconventional shales continues to increase as we drill longer horizontal wells requiring more frack stages and complex completions,” said Deaton.

Today Baker Hughes’ “pressure pumping is sold out in North America. We expect to accelerate the deployment of new hydraulic fracturing fleets in the second half of 2011; however, we do not expect that supply will match higher demand for fracturing this year.”

Baker Hughes is forecasting higher demand for hydrocarbons as the global economy grows. Because of the recent earthquake and tsunami in Japan, the company expects oil and liquefied natural gas “to experience higher incremental demand, supporting high oil prices,” said the CEO. “With shrinking spare capacity, we believe that exploration, development and production spending will increase, raising our confidence that the second half of 2011 will set the stage for a strong 2012.”

Net income in the first quarter reached $381 million (87 cents/share), compared with the year-ago earnings of $129 million (41 cents). Revenue jumped to $4.53 billion, up 78% from $2.54 billion in 1Q2010. North American revenue, which is the company’s largest, more than doubled in the latest period. Results did not include earnings from BJ Services, which Baker Hughes acquired in April 2010.

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