Shale Fracking Returns, Tapping Huge Glut of Idled Equipment

(Bloomberg) -- Shale fracking crews, mired in a glut of idled equipment, are putting some of their pumps back to work as oil prices rebound.

The number of active U.S. frack crews, which bottomed out at 45 last month, has since jumped to 78 last week, according to industry consultant Primary Vision Inc.

Shale explorers started slashing frack work late last year amid shareholder pressure to spend less, and they brought activity to a minimum as oil prices plunged below zero in April. In response to declining demand for their services, pumpers started taking the unprecedented move of scrapping idle fracking equipment in order to get pricing higher.

While almost 200 frack spreads have been eliminated, the total industry supply still stands at roughly 400 crews, according to research from B Riley FBR Inc. That means roughly 20% of supply is being put to work today, according to the bank.

“The initial pickup in demand has been stronger than anticipated, but the supply excesses will take time to purge,” Thomas Curran, an analyst at B Riley FBR, wrote Friday in a note to investors. “The landscape isn’t just structurally oversupplied, but overcrowded.”

Though there has been a pickup in fracking, the last stage in the development of a shale well, explorers are still not drilling for new prospects.

The number of rigs drilling for oil in the U.S. has slumped by more than 70% this year, with the count falling by 1 to 188 this week, Baker Hughes Co. said Friday.

In the Permian Basin of West Texas and New Mexico, the number of rigs was at 131, its lowest in records going back to 2011.

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