WestwoodInsightThe capital cycle for oil and gas is in full swing as pressure pumpers, logistics, and manufacturers deploy capital for new and refurbished equipment. Oil prices are supporting the oilfield service expansion as E&Ps find innovative ways to reduce well completion costs by directly sourcing frac sand, chemicals, trucking, and logistics.

With capital ready to spend, service companies are executing growth plans. The question now turns to developing or expanding the organization’s capability to find experienced personnel, develop more reliable equipment, and maintain the equipment consistently across the fleet. Companies of all sizes are finding it difficult to find and hire qualified people.

People Not Equipment Are Limiting Factor
Qualified personnel are in scarce supply in the Permian. Experienced personnel are key to the last-mile logistics, which involves storing, trucking, and delivering frac sand from rail, transload, or mine to the well or pad site.

Last mile logistics accounts for 35-50% of the costs of delivering frac sand, depending on the origin of the sand and location of the well site. A four-well pad in the Delaware Basin will likely use 35,000 tons of sand, resulting in thousands of truckloads of sand to the wellsite.

Demand for Drivers
Frac sand logistics companies are hiring drivers with a commercial driver’s license (CDL) and two years of experience. Trucking companies such as Dillon Logistics, Tutle & Tutle, and 1845 are seeking qualified CDL drivers too. National, regional, and in-basin trucking companies are seeking drivers. Many of these logistics companies expect to hire at least 50 to 100 drivers. To operate 24×7 operation, trucking companies need two to three experienced drivers for each tractor trailer.

The chart below shows the current truck fleet by provider type.

Current Truck Fleet by Provider Type
Current Truck Fleet by Provider Type
Source: Energent

Energent, a Westwood Global Energy Group company, published the In-Basin Frac Sand Report that highlights the growth of in-basin sand supply and demand. The report features growing in-basin and regional trucking companies that are hiring to meet the sand hauling and storage needs of Permian operators. The in-basin and regional trucking companies will be able to react quickly to the growing need; however, national truck companies are entering the market and bringing their existing workforce to the Permian.

These logistics companies will hire more people, incentivize employees for efficient driving, and raise prices for delivering sand in order to retain experienced drivers. Even if trucking prices increase, it is unlikely to offset the total savings of in-basin frac sand.

Oil prices of above $60/bbl will continue to create demand for last mile logistics, especially in sand hauling and frac sand storage. As E&Ps begin working closely with trucking and logistics companies, the operators will gain more experience in logistics. With an integrated value chain, companies will find unique and innovative solutions to overcome the shortage of drivers.

Todd Bush, VP Commercial, North America Research
todd.bush@energentgroup.com or +1 (713) 714 4583