Calgary 鈥� Very few oilfield service companies are spending money on new equipment, according to Mark Salkeld, president and CEO of the Petroleum Services Association of Canada (PSAC). He spoke to Pipeline Newsvia phone on Sept. 14.
鈥淚t鈥檚 a different environment we鈥檙e in. We鈥檙e trying to make everything squeeze, as we鈥檙e squeezing everything we possibly can out of everything we鈥檝e got, to try get through to a point where we can actually start spending some money again. It鈥檚 definitely tough times,鈥� he said.
鈥淲e鈥檙e still losing equipment,鈥� he said, noting a recent Ritchie Brothers auction at Fox Creek Alberta was full of equipment again. 鈥淪tuff is still leaving. I talked to our members, and they鈥檙e getting contracts, for work on fracs and completions and such. Customers are saying they want such and such a spread, and they鈥檙e saying, 鈥楴o, if we do, that means bringing equipment off the fence and recertification and hiring people and that costs money.鈥�
鈥淐ustomers aren鈥檛 giving up the rates, so they鈥檙e saying, 鈥楩ine, then that鈥檚 not what we can do.鈥欌��
Others have bid jobs at cost or below cost, and the equipment broke down on the road, and the oil company ended up seeking the second bidder because the first couldn鈥檛 even make it to the job.
鈥淚t that case, they鈥檙e paying the rates.
鈥淲e鈥檙e working, but we鈥檙e not making any money.
Asked if PSAC member have been spending money on capital equipment over the last three years, Salkeld replied, 鈥淧retty much, almost no one. The only one鈥檚 you鈥檙e seeing spending anything are your Precision Drilling. They鈥檙e investing in software and updating their rigs for other applications. The bigger, established players are spending money, but even at that, you see in interviews they鈥檙e saying, 鈥業t鈥檚 better than last year, we鈥檙e not losing as much money.鈥欌��
鈥淰ery few people are investing, from the PSAC perspective. That鈥檚 northern B.C., Alberta, Saskatchewan and Manitoba. You鈥檙e seeing a little bit of new iron come out here and there, for long-return, as-built-type equipment for large contracts, but those are few and far between,鈥� he said.
Salkeld used to work in procurement in 2007-09. He recalled a big order to build new coil tubing rigs. Pumps and engines went through the roof in price. 鈥淲hat you鈥檒l see is a replication of that. The prices pick up a little bit, we鈥檒l see demand grow, we鈥檒l see the customers willing to give up some rates, and then you鈥檒l see our members start to invest in equipment. And then the prices will go up again, the cost of equipment and everything else. The whole supply-demand cycle.鈥�
He added PSAC members may be hurting, but they鈥檙e not going to put out equipment on a job unless it鈥檚 good to go.
He doesn鈥檛 think the industry can go much longer without investing in equipment. Mergers are one of the results.
鈥淲e鈥檙e getting to the point, I would say, in a year, where if things don鈥檛 turn around 鈥� we鈥檒l have fewer service companies, but bigger. They鈥檒l have picked through the remnants of what鈥檚 left and rebuild.
鈥淭he oilpatch won鈥檛 shut down for lack of equipment. It鈥檚 going to be the bigger players, who can afford to spend, and get the rates they want,鈥� Salkeld said.
鈥淭he way we鈥檙e working equipment now, it can鈥檛 go much longer without reinvesting, to a certain degree.鈥�
With interest rates going up, lending from banks is in question. But he said there鈥檚 money out there, Canadian, U.S. and foreign money watching for places to invest. 鈥淭hat money鈥檚 going to go to a very select few, superior management teams,鈥� he said.
鈥淭he banks have been burnt. The service companies have been burnt. The only ones making money over the last three years has been Ritchie Brothers.鈥�
