2020年北美石油服务与设备行业展望：2020年又是“少花钱多办事”的一年.docx

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1、North America Equity Research 20 December 2019Oil Services and Equipment Sean C Meakim, CFA AC (1-212) 622-6684 sean.meakim Bloomberg JPMA MEAKIM J.P. Morgan Securities LLC Danyel J Desa (91-22)6157-3301 danyel.j.desa J.P. Morgan India Private Limited Andrew P Herring, CFA (1-212) 622-8585 andrew.p.

2、herring J.P. Morgan Securities LLC Corey Mergenthaler, CFA (1-212) 622-1167 corey.mergenthaler J.P. Morgan Securities LLCFigure 1: Frac Demand (LHS, mm hp) and Utilization (RHS)2011 2012 2013 2014 2015 2016 2017 2018 2019e2020e2021eHP Demand (mm hp) Marketable Utilization Nameplate UtilizationFigure

3、 2: EV/Replacement ValueCFW FTSI NEX LBRT PTEN PUMP RES TCWSource: Company reports, J.P. Morgan estimates. *CJ, FTSI, RES based on BBG consensus.Source: Rystad, J.P. Morgan Estimates.See page 29 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan doe

4、s and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment d

5、ecision.J. P Morgan2020 North America Outlook2020 Another Year of “Do More With Less”； Seasonal Hope Trade Comes Early This YearWe are highlighting an excerpt from our 2020 Outlook: You Can Only Reap What You Sow; Cash Harvesting Cycle to Sort the VWz- from the Chaff report published December 13th.

6、Prelim U.S. E&P budgets suggest low-to-mid double-digit capex decline in 2020. While we expect bulk of the U.S. E&Ps to announce 2020 budgets during 4Q19 earnings, our E&P Budget Tracke】 following 3Q earnings suggests a - 12% decline in y/y spending to be accompanied by a 2% growth in production bas

7、ed on 25% of names offering preliminary guidance. Anecdotal messaging from E&Ps emphasizing value over volumes, has become increasingly homogenous, with several prepared to dial back spending and maintain flattish production profiles y/y in less favorable commodity price environment in order to gene

8、rate better cash flow. Given that 2019 capital budgets have been consistently guided down through the year (down 150-200 bps v. when they were announced earlier this year) owing to an efficiency-induced favorable service cost environment and E&P capital austerity, we think a -10-15% base case reduct

9、ion in 2020 spend is a reasonable bogey. While the rollover in shale productivity appears to be still out in the ether, expectations of a rollover inU.S. production could be enough for a hope trade in early 2020, in our view. Pressure pumping: more attrition needed before the market can balance. In

10、our view, NAM frac epitomizes todays cycle of abundance. Industry capacity was built up considerably over the course of the past cycle, fueled by voracious demand growth in shale and low barriers to entry. Today, with average frac operations far more efficient than in 2014 (stages/day +40%) and E&P

11、growth initiatives waning, many pressure pumping providers are now saddled with equipment that likely will never see a wellsite again. As such, many pressure pumpers chose to retire fleets in 3Q19, such as PTEN and FTSI each announcing 300k hp reductions in nameplate capacity. All told we estimate o

12、ver 2mm hp exited the market so far in 2019. However, with pricing falling and some contractors operating at EBITDA breakeven (or worse) levels, we believe still more hp needs to be cut up before a semblance of market balance can be restored. This will take time though, as pumpers work through spare

13、 parts of idled equipment, and may not come until late in 2020 or even beyond.Peak frac intensity may be at hand; remaining incremental gains to come from improving average work, wellsite efficienciesStages per spread and per day look to be moving towards a plateau, in our view, as does the average

14、number of days to drill a well. Across the major shale basins, we think that operators have by and large found the functional limits for leading edge well metrics, such as lateral length, stages per well, and proppant load. In some instances we actually have seen a reversal in leading edge statistic

15、s, such as with proppant load per foot, where operators are honing in on an optimal loading of 2.0- 2.5k Ibs/ft. in most basins, even while some wells have experimented with loads of 3.0k Ibs/ft and above, according to Rystad.2011 2012 2013 2014 2015 2016 2017 2018 2019e2020e2021eFrac Crew Demand-心H

16、P Demand (mm hp) Useful Capacity (mm hp)Net Useful Capacity Change (hp)Newbuild hp additions2003 2005 2007 2009 2011 2013 2015 2017 2019e 2021e Working Idle/Repair Out of Service Pre-2008 Build 2009-12 Build 2013-15 Build 2016-18 BuildSource: Spears, Rystad, J.P. Morgan estimates.Source: Spears, Rys

17、tad, J.P. Morgan estimates.We expect some investment in dual fuel and e-frac fleets in 2020 to win work with ESG motivated operatorsFigure 36: E-Frac Industry AllocationConventional fleets 97%USWSHALEvolutioneFrac Well ServicesPUMPSource: Company reports and J.P. Morgan estimates.12ESG fleets: a bri

18、ght spot for growth? We continue to see a niche opportunity Operators (particularly the majors and largest E&Ps) are increasingly under pressure from investors to make strides in lowering carbon emissions as part of a broader push for ESG priorities. Within the frac space, the most viable solution f

19、or achieving lower emissions is by switching the fuel for pumps fi*om diesel to less carbon intensive natural gas. This can be achieved either by outfitting fleets with dual fuel engines that can run on mix of diesel and gas, or by adopting purely electric fleets powered by gas turbines. Such system

20、s can present significant fuel saving benefits as well when operated in basins with abundant field gas. Given the high upfiont outlay cost, we think e-frac will remain a niche part of the market through 2020 (3%), though we expect to see some incremental investment. More likely, in our view, are fur

21、ther conversions to dual fuel fleets, such as those contemplated by LBRT.Table 3: Frac Comp SheetTickerRatingPTUpside2020e FCF Price Div. Yie IdYieMk,CapEVEV/EBITDAPrice/BookHorsepower EV/Replace ment (000)(est.)$/sh%$/sh%$,bn$,bn2017 2018 2019e 2020e 2021 e Currenj5-Yr Avg4Q19eCFWNC$1.18-10%0.21.15

22、.8x3.5x7.2x7.5x7.5x0.4x1.0x1,4000.8xFTSINC$1.216%0.10.41.1x1.0x3.8x5.3x5.3x2.8xN/A1,4000.3xNEXOW$933%$6.77-16%1.41.72.3x2.3x3.4x4.0x3.2x1.5xN/A2,2000.5xLBRTOW$128%$11.121.8%5%1.31.65.5x3.5x5.3x6.7x5.8x2.4xN/A1,0801.5xPTENUW$6(40%)$10.001.6%10%1.92.85.2x3.6x4.7x6.1x6.1x0.7x1.1x1,3001.1xPUMPOW$1210%$1

23、0.93-14%1.11.17.5x2.7x2.1x2.5x2.5x1.2xN/A1,4150.8xRESNC$4.976%1.11.12.4x2.7x8.2x7.9x7.9x1.2x3.8x7500.8xTCWNC$1.15-8%0.30.41.9x4.4x14.2x9.8x9.8x0.4x0.8x6000.4xI7%0.81.34.3x3.0x5.9x6.1 x5.9x1.3x1.7x1,2100.8xJSource: Company reports and J.P. Morgan estimates. *CFW, FTSI, RES, TCW based on BBG consensus

24、Favor the Dedicated Fleets: OW NEX, LBRT, PUMPWe continue to advocate for investing in the “haves“ while avoiding the “have notsn in pumpingSource: Company reports, J.P. Morgan estimates. *CJ, FTSI, RES based on BBG consensus.Figure 37: Historical Pressure Pumping EBITDA margins60% i-20% J2006 2008

25、2010 2012 2014 2016 2018 2020e PUMPNEX CFWTCWPTENLBRTGroup AvgSource: Company reports. PTEN Pumping margins; TCW Canadian margins.While our 2020 outlook for the overall frac industry is fairly bleak, we see reasons for relative optimism among the dedicated pressure pumpers within our coverage. Certa

26、inly much of the industry is defined by fragmentation, low barriers to entry, and commoditized equipment. However, as E&Ps scale back the scope of their completions work and focus in on the most the most profitable resources, contractors that can provide the most efficient, timely results and work i

27、n a partnership structure with operators are going to take the lions share of work going forward, in our view. With limited exposure to spot market and long-standing relationships with premier operators, we think the dedicated fleet models embraced by NEX, LBRT, and PUMP can make each a relative out

28、perfbrmer in the industry. Whafs more, on a relative valuation basis we see compelling case for owning NEX and PUMP, which trade at- or-below the peer group EV/replacement value multiple. We model superior margins in 2020 for these names relative to the group, and think attractive value can be unloc

29、ked on a re-rating next year.40%20%0%13Land Rigs: Lower Counts to Stay, Pricing Discipline Key2H19 saw accelerated rig drops, we think the worst is already behind usThe U.S. rig count is down -26% YTD, with -17% of this coming since 6/302019 saw the worst decrease in U.S. land drilling activity sinc

30、e 2016 (when the L-48 count fell -47% y/y), with the 2019 YTD average of 952 down -8% from 2018s average of 1,032. Todays current level of 799 paints an even bleaker picture, down - 26% from where it entered the year (1,083, the high point for this cycle). Reductions over the course of the year were

31、 particularly acute in 2H19, with -17% of this years decline taking place since 6/30. This can largely be attributed to drillers curtailing spending programs to compensate for fi*ont-loading activity in 1H19. While the falloff has continued in recent weeks, the pace has slowed, we expect to see only

32、 10-15 more rig drops before the end of the year.Figure 39: JPM U.S. Land Rig Count Forecast2,000 1,800 1,600 1,400 1,200 1,000800 600 400 200Source: Baker Hughes and J.P. Morgan estimates.DUC Count JPMe DUCsSource: Baker Hughes and J.P. Morgan estimates.20199s decline can reverse in 1H20, though ou

33、r base case assumes a -13% decrease in the L-48 count in 2020We expect a 1Q20 rig count +1% stronger than 4Q19, but overall forecast a -13% y/y reduction in 2020Heading into 2020, we see scope for a reversal in the rig count delta early in year. Our view is driven by E&Ps resetting budgets on (relat

34、ively supportive) price decks most likely in the $50-55/bbl WTI range, and by our expectations for a repeat of 2019s seasonal front-half spending weighting. Recent commentary from the group has been supportive of this view, with each of the Big Four signaling prospects for improved demand in 1Q20. H

35、owever the magnitude of the rebound we model is fairly restrained, with expectations for only a +1% q/q gain in the average count from 4Q19 to 1Q20. Over the course of 2020, we think 2Q20 is likely the strongest period from an activity standpoint, before budget restrictions and seasonality chip away at the count in 2H20. As such our base case is for a -13% y/y slowdown for the L-48.Figure 41: Share of Rig Count by Drilling