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 The moves by the world's No. 1 and No. 2 oil services companies show
how they are scrambling to book sales of new technologies to
customers short of cash after a 60 percent slide in crude to $45 a
barrel.
In some cases, they are willing to take on the role of traditional
lenders, like banks, which have grown reluctant to lend since the
price drop that began last summer, or act like producers by taking
what are essentially stakes in wells.
At Halliburton, some of the capital to finance the sales will come
from $500 million in backing from asset manager BlackRock, part of a
wave of alternative finance pouring into the energy industry that
one Houston lawyer said on Thursday allows companies to "keep the
engine running."
When its second-quarter net profit tumbled by more than half a
billion dollars to just $54 million, Halliburton's Chief Executive
Dave Lesar told analysts the company needed to find new revenue. The
BlackRock money, he said, would allow Halliburton to "look at
additional ways of doing business with our customers, different
business models, push beyond where we have been today."
Halliburton declined to provide additional details, including how
many customers it has for its financing program, citing confidential
dealings with clients. Schlumberger has said it has eight onshore
refracking clients in North America.
Another variant, which Halliburton has considered and Schlumberger
has pushed, is one in which the companies cover up-front costs for a
producer and then get a piece of a well's performance.
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.
TINY BALLS
One way to refrack involves injecting tiny rubber-coated balls and
reactive fluids that can later dissolve in a well to seal off
existing fissures in rock. This boosts pressure. Then, new cracks in
rock that release oil are created with a pressurized frack slurry of
sand, water and chemicals.
It is not yet clear how much business refracking will generate.
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Oilfield services analyst Angie Sedita at the Swiss bank UBS said in
a note to clients that refracking will "not be enough of a demand
driver" in 2016 and will take time to make inroads.
Two prominent shale producers, EOG Resources Inc and Anadarko
Petroleum Corp, have both said refracking technology needs
improvement.
Others, including Chesapeake Energy Corp and Devon Energy Corp have
said they have been refracking and are happy with the results.
Devon said this week it has refracked 1,000 wells over the years in
North Texas and indicated it has no plans to tap unusual financing
from a service company.
A few dozen wells have been refracked twice and the company said it
is working on newer generation refracking methods for its large
inventory of wells.
"We've got a great opportunity there and we're continuing to
prosecute that on our own," Tony Vaughn, Devon's executive vice
president for exploration and production said on Wednesday.
Schlumberger Chief Executive Paul Kibsgaard has acknowledged
producers might be unwilling to give up output from a well they
think will be lucrative, and instead choose a traditional services
contract.
"It's just a reflection of do they want to capture more of the value
themselves or would they like to outsource all the risk and
potentially much more of the upside to us?," he said on the
company's July results call.
(Reporting By Anna Driver; Writing by Terry Wade, editing by John
Pickering.)
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