Along with the price per barrel, rig count reporting is, or at least used to be, many people’s indicator of the state of the oil industry as a whole, but with advancements in longer lateral drilling techniques, there has been an increase in production with stable or falling rig counts. Although an article by the New York Times states that rig counts have increased over a third in the last year because of technological advances in drilling techniques, that may not paint the whole of the recovery so far.
When the price per barrel fell below $40, production companies had to become innovative to try to cut costs, while trying to increase output. Instead of building many new rigs, the surviving businesses lengthened their horizontal wells which yielded more oil. With the increase in lateral drilling, which involves the pumping of more sand and chemicals into the pipe, and the increasing price per barrel, the demand for sand haulers will be on the rise.
The Permian Basin production is surging and was predicted to reach 2.79 million barrels a day by the end of January. This is 30 percent higher from last year, according to a News Journal report. Even more evidence of this need is the demand for sand. In West Texas alone there are an additional six sand mines scheduled to open in the next few months. Plus, Infill Thinking reports that of the 16 companies who they are tracking, there are plans for 23 more projects.
The average well uses around 16 million pounds of sand. The way the industry is trending and with the increasing number of rig counts, there will definitely be a need for more sand haulers. Raymond James projects U.S. sand demand will be at least 150 percent higher than 2016, which is over 80 million tons.
Will the oil industry as a whole ever bounce back to where it was before the crash a few years ago? That is yet to be seen. However, it’s encouraging with the movement in the industry and the forecasts from many oil industry experts.
The oil industry may not be “back” yet, but it is definitely on the rise.
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