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The Show Must Go On
“Frack Now, Pay Later”

That’s the strategy being employed by some of the shale industry’s top oil services companies. Halliburton and Schlumberger are struggling to find and keep business in the U.S., where many fracking operations are quickly becoming unprofitable in the face of plunging crude prices. To keep the oil flowing and the potential for profit-making (even if it’s months or years in the offing) alive, the companies are trying different tacks, acting sometimes as lenders by extending credit lines to struggling shale producers, or playing the role of producer themselves by covering certain capital costs in exchange for a stake in the wells being drilled.

As Reuters reports, both are hoping to keep the wheels of the industry greased while they introduce innovative new techniques to find ways to turn a profit even with oil below $50 per barrel:

The services companies have made these special offers to producers in a bid to roll out the new business line of refracking, in which existing wells are worked over to lift output.

Halliburton and Schlumberger tout refracking as a cheap way of adding barrels because it avoids drilling new wells, which can cost several million dollars each.

This change in tactics comes at a time when smaller shale firms—a necessary ingredient in America’s fracking boom—find themselves in serious and even existential trouble. Wildcatters lack the cash reserves that their larger cousins the oil majors are falling back on, and with banks increasingly wary to extend lines of credit, the outlook is bleak. “For the weaker companies, it could be very, very painful. Some of them are essentially running on fumes,” said Jimmy Vallee, a partner at Paul Hastings, a Houston-based energy mergers and acquisitions practice.

Fracking shale isn’t cheap, but that’s not stopping the industry from trying anything and everything to keep up production in today’s bearish market.

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  • Kevin

    This is a sign of an industry in serious financial trouble. Halliburton’s, Schlumber’s and various other suppliers DSO’s must be skyrocketing. This can buy time at the cost of eating their seed corn but if a rebound in prices doesn’t come in the not too distant future fracking will slow way down and the industry wither away.

  • Jacksonian_Libertarian

    This is how free markets are supposed to work, the smartest, most innovative, most efficient, and financially strongest will survive to rip OPEC a new one. You will notice that the Government Monopoly owned Oil Monopolies of OPEC, aren’t changing how they do anything in order to adapt and prosper in the new environment.

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