Despite a hiccup during the recession, industry revenue has grown strongly since 2007
Los Angeles, CA (PRWEB) September 28, 2012
Hydraulic fracturing, popularly known as fracking, is the process of creating fractures in rock formations by injecting fluid into cracks to force them further open. The openings allow resources, such as oil and gas, to flow from the formation and into a wellbore, from where they can be extracted. Therefore, the Hydraulic Fracturing Services industry generates about 94.0% of its revenue from providing services to the Oil Drilling and Gas Extraction industry (IBISWorld report 21111). Services to oil and gas producers can range from providing hydraulic fracturing chemicals to fracking. “As a result, the industry is directly affected by fluctuations in oil and natural-gas prices, since these fuels drive demand for drilling and related services,” says IBISWorld industry analyst Radia Amari. Industry revenue has increased at an estimated average annual rate of 9.7% over the past five years, including growth of 9.6% in 2012 to total $7.3 billion. Over the five years to 2012, the prices of oil and natural gas have increased at annualized rates of 8.0% and 53.0%, respectively. In 2009, revenue plunged 26.1%: the economic crisis cut demand for oil and gas, decreasing prices and slashing demand for drilling activities. However, the industry began to rebound in 2010. Over the past five years, profit has risen more strongly than revenue. As oil and gas prices soared before 2009, revenue was pushed up more sharply than costs, allowing for rapid growth in profit, which accounts for about 24.1% of revenue.
During the five years to 2017, revenue in the H ydraulic Fracturing Services industry is expected to increase. Rising oil and natural-gas prices will drive much of this demand. However, industry providers will experience increasing competition from international firms involved in the contract bidding process and from oil and gas extraction companies establishing fracturing divisions. Heightened regulation responding to concerns about fracturing's potentially harmful environmental and health effects will hinder profit margins. While industry revenue is projected to grow, company numbers are anticipated to decrease through 2017 because of heightened regulation and acquisition activity. Players like Basic Energy Services completed acquisitions over the five years to 2012 in order to expand their market share. This trend is anticipated to continue as firms experience the most growth potential through mergers and acquisitions.
The Hydraulic Fracturing Services industry has a low level of market share concentration. According to US Census Bureau data and IBISWorld estimates, the three largest firms in the industry account for about 28.9% of industry revenue in 2012. The industry has been expanding over the past five years; however, it is not anticipated to stay that way in the five years to 2017 as the number of enterprises decreases at an annualized rate of 0.2% to 573. According to Amari, there was a small amount of consolidation activity in the five years to 2012 as a result of the recession and the subsequent reshuffling of operations among oil and natural gas field services companies. Nevertheless, the industry is still dominated by small firms that specialize in specific fracturing technologies and regions. One reason for industry fragmentation is that the industry's clientele often need hydraulic fracturing services on a regional basis, which allows for the entrance and success of smaller firms. For more information, visit IBISWorld’s Hydraulic Fracturing Services in the US industry report page.
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IBISWorld industry Report Key Topics
This industry provides hydraulic fracturing services for oil and natural gas extraction companies. The technology allows oil and natural-gas extraction companies to reach hard-to-find natural gas below the sediment.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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