Market is oversupplied for pressure pumpers, then what?According to TCW there is 600,000 hp available above demand for Q1 2019 or in other wors 600khp doing the nothing. In order for the market to balance itself, it is either we see one or more of the following:
1) one or more of these service companies get to go under
2) Activity increases
3) Freeze equipment addition
4) M & A as there will be no
I follow only Calfrac, Trican and Step, but there are several other companies out there like secure, essential, BJ, Element, SLB and HAL
Would any of these go under anytime soon? I don't know; surely STEP have levered themselves, but their odds of going under is probably close to Nill. The company is trading at almost the same price they paid to buy tucker. While tucker currently constitutes less than 40% of their capacity, at $1.85 sp you are getting the remainder of the business >60% for free!
ARC don't care about SP short term flacuations as they are here for the long haul; simply put, they win if STEP succeed or even fails! Trican has 45M in total debt so they are not going undre any time soon eaither. CFW, however, is debt laden with close to $1B in debt, but they are not going under anytime soo either as they have so many levers to pull such as selling their russian or laten american operations. Additionally, two of their shareholders are billionaires.
Activity, at least in Canada, in the short term is going to most likely to slow down as we approach spring break.
I am not sure who the idiot that will add more equipemnt to an already oversupplied market when you could do M & A and buy other companies for fraction of their replacement costs!
I think what the industry needs is really M & A , consolidate and be more efficient!
As for STEP and in the short term, management need to step up their game and start buying more shares. If these guys spend 500k, it would probably take SP back above $2.50 in no time!