Halliburton and Schlumberger, which are leaders in hydraulic fracturing, will look to service-intensive oil basins like North Dakota to soak up this influx of new equipment given that the US natural gas market is glutted.
Investors wary of natural cycles inherent in drilling worry about killing the market with supply, yet so far pricing for "fracking" crews is holding up going into 2012.
Halliburton, the US market leader, said it sees no trend in scattered reports of pricing declines for pressure pumping crews, who can book revenue of more than $400,000 per day to inject the chemical-laced water and sand to hydraulic fracturing.
"Our general view is that they have to be one-off, because we don't see that in the marketplace at all," Mark McCollum, Halliburton's chief financial officer, said at a Dahlman Rose conference in New York recently.
The price firmness comes despite the struggles of natural gas companies that are evident in the slide of the gas-focused rig count to a 23-month trough after natural gas prices neared two-year lows last month.
The total Baker Hughes US rig count, a closely watched measure of activity, has fallen since by 36 rigs since October, when it was eight shy of a quarter-century peak of 2,031 rigs.
Services demand is driven by the rush for oil, the price of which is straddling $100 per barrel.
"As I look at the contract rollovers that cross my desk, customers continue to suggest they're going to spend more money in 2012," McCollum said.
Lending support to this view is a Barclays Capital survey out this week predicting record global spending on oil and gas exploration and production next year. Hydraulic fracturing has revolutionized US energy and boosted profits for oilfield service companies that carry out the controversial technique. US regulators added to concerns about it with a report on Thursday that found hydraulic fracturing fluids had contaminated drinking water in Wyoming.
The industry is undeterred, insisting hydraulic fracturing is safe as companies build ever more equipment. A Global Hunter Securities tally of their plans suggests 20 percent growth in pressure pumping capacity in 2012, after this year's 50 percent rise.
McCollum says greater efficiency in drilling wells to be fractured is one reason why so much capacity will be put to work.
"For the same rig count that we have today, which is still below where we were at the last peak, there's significantly more wells being drilled and significantly more completions," he said.
That means no relief for oil and gas firms that face rising prices for everything in regions where the drilling business is still finding its feet. Halliburton says 90 percent of its price increases are eaten up by inflation.
Given the demand, clients signing up for equipment now can expect it to be delivered in the second quarter of next year.
Some analysts on Wall Street are warming to this rosier view of 2012. Since Halliburton talked down expectations in October, four of the five 2012 profit estimate changes by analysts tracked by StarMine were increases.
Analysts at Tudor Pickering Holt, however, believe Wall Street is way too optimistic. The Houston investment bank, with a 2012 earnings per share estimate 38 cents below the $4.11 average, sees Halliburton's North American margins falling 3 to 5 percentage points next year from nearly 30 percent now.
After Halliburton, the top pressure pumping companies are Schlumberger, Baker Hughes and Frac Tech, which filed in September for an expanded initial public share sale to tap investor interest in the hot market.
The view of 2012 from Baker Hughes is more nuanced, with executive Andy O'Donnell saying that while he did not fear a price war, he does expect "competitive pricing" in some areas.
But Richard Spears, a leading oilfield services adviser to the oil sector, said he does not see the market for pressure pumping equipment coming back into balance for a year, and maybe longer if oil prices remain around $100 per barrel.
That is good for the likes of Complete Production Services, which was expanding even before its $2.6 billion takeover by Superior Energy Services Inc. Superior Chief Executive David Dunlap said 70 percent of Complete's pumping capacity is now under term contract, a new development for the industry as concerns about availability lead oil and gas companies to lock in equipment for longer periods.
"You give up a bit of profitability in exchange for certainty," he said. "But the profitability is still very strong and... certainly inspires reinvestment."
Global Hunter estimates industry capacity at 14.6 million hydraulic horsepower (HHP). A well tends to require about 30,000 HHP, though that is likely to rise as some of the new oil reservoirs can require dozens of frack stages per well
Complete, with a 427,000-HHP frack fleet, is adding 230,000 HHP in 2012 — twice as much as this year. Nabors Industries, which bought a pressure pumping firm in 2010, will add 110,000 HHP to its 745,000 HHP in the next two quarters alone.
Their conviction that more will be needed is underpinned by the much-heralded boom in oil basins like North Dakota, where oil output rose 5 percent in October from the previous month.
Some pressure pumping price erosion has occurred in the gas-heavy Marcellus shale, but James West at Barclays Capital sees none in liquids-rich shales.
"More of a flatness, and in some markets we are still well under-supplied," he said.
Gas may even be a hidden opportunity, with projects on hold while US benchmark prices remain down around $3.50 per million British thermal units.
"The gas backlog will give the well servicing market the next leg up, once it's stable above $4," Basic Energy Services CEO Ken Huseman said.
