Energy Services & Equipment: The Shale Survey: Rigs on the Rise?

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Energy Services & Equipment: The Shale Survey: Rigs on the Rise?

FoundationMservice demand. In frac, key drivers of efficiency improvements have included

rising completions intensity (HP/fleet +35% or +15k HP/fleet since '20) and

the rapid adoption of simul frac (now 40% of completions vs <5% in '18).

Partially offsetting this, however, is worsening well productivity with '24-'25

production per foot down ~7% vs the '22-'23 avg. On the cost side, our

estimates assume ~5% higher well costs in 2026-27 driven by inflation and

longer lateral lengths, followed by an additional ~5% increase across 2028-

30, resulting in roughly ~10% cumulative per-well cost increase over the

period.

Positioning – How to Play It: Among NAm-focused OFSE companies, we prefer

stocks with more diversified and unique earnings drivers including OW-rated NBR

which stands out given its outsized int'l land exposure (~45% of revs), where we see

the most post-conflict growth. We also continue to see value in OW-rated LBRT,

particularly from its recently launched on-site power business, which we do not

believe is fully reflected in the current valuation. Finally, among global OFSE large

caps, OW-rated HAL (Top Pick) has the most NAm land exposure (~45% revs) and

shares some of portfolio attributes we favor with the NAm-levered players – solid

exposure to int'l land (~30% of revs) and to on-site power via its VoltaGrid

ownership stake and JV.

Exhibit 1: Drilling & Frac Demand, Utilization & Margins – We see 2027 growth

across-the-board, but see steadier drilling demand and utilization growth mid/

longer-term. While frac margins offer the most upside in our forecasts, this is off

of a lower base relative to driller margins.

US Land Macro & Margin Outlook (Indexed Value, 2025 = 100)

Rig Demand Frac Demand