KEY POINTS
- U.S. oilfield service companies are facing lower demand and weaker pricing.
- Oil producers are cutting drilling activity despite record-high output.
- Rising debt and bankruptcies are hitting smaller service firms the hardest.
The U.S. oil industry is facing an unexpected challenge—record-high crude production but fewer rigs in operation.
Oil producers, especially in the shale sector, are becoming more efficient, leading to a decline in drilling activity. The number of active rigs in the Permian Basin, the country’s top oilfield, has dropped to its lowest level since early 2022.
Baker Hughes reported that the total rig count has hit its lowest point since December 2021, with active fracking fleets also declining to levels last seen in 2021.
Despite strong production levels, this trend is creating financial pressure on oilfield service firms that rely on drilling activity for revenue.
Lower crude prices put pressure on service firms
A weaker outlook for oil prices is compounding the problem. Analysts project that U.S. benchmark West Texas Intermediate (WTI) crude will average $63 per barrel in 2025.
According to Reuters, many Texas and New Mexico oil executives have based their capital planning on a $70-$75 range, making them more cautious about increasing spending.
As a result, land rig day rates are projected to reach their lowest levels since mid-2022. Companies like Halliburton have already seen a 9 percent revenue decline in their fracking division, with more pricing pressure expected throughout the year.
Liberty Energy, another major player, is forecasted to see its earnings per frac fleet drop from $24.7 million in 2024 to $19.9 million in 2025.
Industry executives acknowledge the challenge, with Halliburton CEO Jeff Miller saying, “We’re not immune to pricing.” The combination of improved drilling efficiency and weaker oil price forecasts is squeezing the entire oilfield services sector.
Rising debt and bankruptcies in the sector
As service firms struggle with lower demand, many are also dealing with rising debt. Companies that previously owed between $20,000 and $250,000 are now reporting debts as high as $5 million to $8 million.
The financial strain has led to an uptick in bankruptcies, with energy firms collectively owing $9.59 million in just the first two weeks of 2025.
“This is the most bankruptcies I’ve seen in the last 18 months,” said Hal Wallace, a Texas-based debt collector specializing in the oil sector. Smaller service companies, in particular, are struggling to stay afloat as demand for drilling rigs and fracking services declines.
Despite these challenges, the industry remains hopeful that a recovery in oil prices or a rebound in drilling activity could ease the pressure later in the year. Until then, U.S. oilfield service firms are bracing for a difficult 2025.
