The North American market for hydraulic fracturing services will see strong growth through 2016 due to robust D&C activity, with moderate pricing increases expected in 2014, according to just-published analysis from PacWest Consulting Partners. PacWest's PumpingIQ and WellIQ reports, which provide in-depth analysis and forecasts of North American drilling and completion activity and the hydraulic fracturing services market, indicate ongoing cost recovery-driven pricing increases in 2014. These are the first pricing increases the market has witnessed since late 2011.

According to PacWest, demand for frac services in the US Land market is expected to increase by 10% in 2014, and by 11% in Canada. Efficiencies across the D&C value chain, continue to erode realized frac demand, although at a slower rate than in 2012/2013. "Multi well-pad drilling, smart scheduling, 24 hour operations and other practices have softened frac demand growth since 2012, and will continue to do so into 2014. In particular, the Permian basin should see greater efficiency impacts as more companies shift to horizontal well and multi well pads," according to PacWest Partner and PumpingIQ lead author Chris Robart.

Frac capacity utilization is expected to increase to 81% in 2014; however, PacWest sees potential market improvements being dampened by aggressive frac capacity additions. According to the company's analysis, smaller Tier 2 & 3 pumpers were quick to react to the improving outlook for frac services and will account for nearly 2/3 of the 1.1 million HHP in net additions expected during 2014.

Despite this, PacWest forecasts moderate pricing increases in 2014 due to recent success by frac services companies in achieving greater cost recovery. This was made necessary by weather and supply chain challenges in late 14Q1 that drove up supply costs for many frac consumables. PacWest forecasts costs for key materials will continue to rise through 2015, resulting in continued cost recovery/pricing increases.       

Looking north, PacWest expects the Canadian market for frac services to develop similarly to the US market, as increases in frac demand are poised to bring the Canadian market into balance. This will be driven by activity growth in Duvernay and Montney plays, which together PacWest forecasts will push frac demand to 1.84 million HHP in 2014 (+11%). Further development in other plays will also accelerate demand.

Globally, PacWest forecasts frac capacity will increase by 16.2 MM HHP (+65%) between 2013 and 2018 (year-end capacity), with markets outside North America accounting for 55% of that growth. China continues to lead international additions, and surpassedCanada as the second largest frac market in the world during 2013. PacWest continues to cover emerging markets with the inclusion of Brazil and Colombia in their 2014 Q1 publication. Future PumpingIQ releases will include coverage of Argentina andRussia.