Chris Wright — Chief Executive Officer and Chairman during his Earnings Call.
Our industry has been hit with two large shocks since our last quarterly earnings call; a market share war that flooded the world with oil at the start of the second and larger shock, the COVID-19 pandemic, which is driving by far the largest-ever demand contraction for oil. This one-two punch led to crashing oil prices, and now growing logistical challenges to even move oil at any price. The result is an abrupt reduction in rig count and an even more abrupt curtailment of frac activities than we have ever seen.
Fortunately, Liberty was built to survive tough times. As in the last 2014 to 2016 downturn, we plan to emerge on the other side having deeper customer relationships with the industry’s leading players, larger market share and increased competitive advantages. Getting there, however, will involve serious challenges for our whole industry.
Liberty Oilfield Services to let go 183 workers based in Adams Counnty during the last few weeks. it’s unclear if more layoffs are anticipated.
What about fracking activity for the rest of the year?
The rapid drop in frac activity is understandable as many producers are forced to shut-in existing production to better align supply with demand as oil storage is rapidly approaching capacity.
In the next few months, we expect very low frac activity in the oil basins. US oil producers are now navigating forced production shut-ins due to storage constraints. US oil production will decline rapidly due to both wells being shut-in and extremely low levels of new wells coming on production. Where things go next depends greatly on how quickly demand for oil rebounds as world economies reopen and oil begins to be drawn out of storage. The pace of oil storage for us and the pace of oil demand rebound from increased economic activity will strongly influence oil prices, and therefore producer appetite for frac services. These factors may lead to an increase in frac activity later this year.