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Calfrac Forecasting Steady Completions Demand, Pivoting from Natural Gas Areas
Calfrac Well Services Ltd. is projecting steady utilization of 15 completion fleets across the United States and Canada for the rest of this year, management said.
“Even with the constructive long-term outlook for the United States pressure pumping industry, the company expects to navigate any potential activity reduction in its natural gas concentrated regions by remaining steadfast in its disciplined returns-focused strategy and will either relocate equipment to more active regions or decrease its operational fleet count according to demand,” the Calgary-based hydraulic fracturing (fracking) firm said.
Calfrac is planning to run 10 completion fleets in the United States throughout the rest of the year.
The Canada operations “generated significant profitability improvement in 2022,” management said. It sees the “momentum to continue into 2023 as it has activated a large fracturing fleet, utilizing equipment that was temporarily mobilized to the United States during the fourth quarter, to meet growing customer demand during the first quarter.
“While weather and client budget exhaustion reduced activity toward the end of last year, Calfrac expects a strong first quarter with consistent utilization for its five large fracturing fleets and six coiled tubing units into the second half of the year.”
Calfrac’s Argentina unit, meanwhile, “exited last year with very strong momentum and anticipates increased utilization combined with a full year of improved pricing for its fracturing fleets in the Vaca Muerta shale play and the conventional basins in southern Argentina to produce enhanced financial returns in 2023.”
The company plans to deploy its upgraded Tier IV dynamic gas blending (DGB) pumps gradually over the next 18 months across its operations. DGP engines can burn either natural gas or diesel.
Calfrac called 2022 “substantially improved” in Canada, the United States and Argentina after increased demand for natural gas and oil increased prices and drilling that put a stop to losses inflicted by the Covid-19 pandemic.
The United States emerged as the cornerstone of recovery in completing horizontal shale wells. A “transformative year” nearly doubled field services revenue, said the firm.
“Activity in the Rockies and North Dakota regions increased relative to the comparable quarter in 2021 while activity in Pennsylvania was lower than the comparable quarter in 2021 due to weather-related down time and job mix,” management said.
Intense winter storms in the Rockies also “impacted activity in December and during some points of the first quarter of 2023.”
Calfrac, which reports in Canadian dollars (C$1.00/US 73 cents), said revenue in the United States jumped to $805.8 million in 2022 from $428.5 million the previous year. U.S. well completion jobs grew to 15,054 in 2022 from 13,833 in 2021.
In Canada, Calfrac revenue grew to $442.3 million in 2022 from $280.3 million in 2021. Canadian fleet jobs increased to 13,503 in 2022 from 11,769 in 2021. A January British Columbia dispute settlement with the Blueberry River First Nations spells more growth, said the firm.
In Argentina, Calfrac revenue gained to $251.1 million in 2022 from $171.5 million in 2021. Fracking assignments grew to 1,973 in 2022 from 1,800 in 2021. The South American operation speeded up and a strong pace is forecast to continue this year.
With help from a new generation of efficient equipment, Calfrac predicted “further earnings growth throughout 2023 as the pressure pumping market is anticipated to remain tight.” The 2022 performance put a stop to 2020 pandemic reversals that included workforce cuts of 40% and 50% off spending.
The Calgary firm posted 2022 fourth quarter net income of $14.7 million (17 cents/share), from 4Q2021 losses of $29.1 million (minus 77 cents). For the year, net profits were $35.3 million(47 cents/share), reversing 2021 losses of $94.7 million (minus $2.52).
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