The average monthly price of West Texas Intermediate (WTI) crude declined to $49.52 per barrel in December 2018 from the record high of $70.98 per barrel reached in July 2018, per the U.S Energy Information Administration.
The significant decline in the price of the commodity has convinced explorers and producers in North America to start 2019 with a conservative capital budget.
Importantly, U.S. explorers are facing constant pressure from investors for higher returns instead of production growth, forcing upstream energy firms to restrict capital spending through 2019.
Lower investments in oil exploration and production operations have dented demand for oilfield services since the oilfield service companies help drillers efficiently drill oil wells.
Permian Bottleneck, DUC Wells
Halliburton is among the leading providers of oilfield services in North America with prime focus on the shale plays.
However, the Permian basin, which is the most prolific shale play in the United States, is still facing a pipeline bottleneck problem thereby restricting explorers and producers from producing the commodity at the optimum level. This is hurting demand for Halliburton’s oilfield services.
Moreover, there is a record backlog of drilled but uncompleted (or DUC) wells in the Permian Basin — signalling a slowdown in well completion activity. Worryingly, the high DUC count means lower-than-expected demand for Halliburton’s completion tools and associated activities, which will be needed once these wells are finalized.
Declining Rig Count
U.S. drillers have now become more efficient as they are deploying lesser rigs to produce more oil and gas volumes.
Since Halliburton assists explorers and producers to optimize well construction, the decline in the count of rigs being employed has hurt this oilfield service giant’s Drilling and Evaluation business unit.