E&P operators at times dive into the oilfield-service business out of necessity, when they are unable to find the resources they need to complete their well programs on time and within budget. EOG Resources Inc. is mining its own sand for proppant, for example. And, Chesapeake Energy Corp. operates Nomac Drilling LLC.

Scott Sheffield, chairman and chief executive of Pioneer Natural Resources Co., predicts operators will get into the pressure-pumping business this year, as traditional providers are reluctant to significantly expand capacity. Pressure pumping is part of the hydraulic-fracturing process.

"Currently, there are thousands of wells backlogged for completion due to this short supply of equipment," Sheffield says.

By Halliburton Co.'s estimate, there are more than 3,000 wells that are "WOC" or waiting on completion, a phrase that is increasingly appearing in E&P companies' investor presentations.

Some relief is expected as demand in dry-gas-rich plays falls this year, particularly in the pumping-intense Haynesville play, as operators finish securing their expensive leasehold—at least what acreage they have come to deem still prospective.

Yet, demand for fracturing liquids-rich wells in the Bakken, the unconventional Permian and the oily Eagle Ford is expected to grow, "leaving the industry short on pumping services, leading to continued, high frac costs," Sheffield says.

Jack Aydin, senior managing director for KeyBanc Capital Markets Inc., expects pressure-pumping capacity to remain tight throughout the first half of this year. "However, the industry might see a 25% to 30% increase in capacity coming online by the second half."

The Global Hunter Securities LLC research team expects this won't be enough. "The debate over when the pressure-pumping market will be overbuilt has been going on for the past several months. Judging by the stock prices of the players involved, it does not appear that investors believe that time is soon."

In the group's base-case analysis of 2011 demand for hydraulic horsepower or HHP, it estimates drillers in the Lower 48 will want 13.6 million, while supply is 8 million currently and possibly 3 million new HHP will come online during the year.

Some factors may close the gap, however, the team notes, so it looked at the current horizontal rig count and pared it by cutting rigs working in the Haynesville by 25%. Then, it factored in improved frac speed, reducing completions days by a very aggressive 20%. Then, it allowed for reduced equipment downtime for maintenance to average 5% rather than the current 12%. (On some wells it is as much as 18%.)

Based on this, the lowest-case scenario for demand for HHP in 2011 would be 9.8 million, the team reports. "The market still remains under-supplied, according to our base-case scenario, which we believe to be the most likely scenario."

And, any oversupply would quickly be absorbed by calls for completing the more than 3,000 wells estimated to be WOC, the group adds.

Heated talk of the growing inventory of uncompleted wells surfaced in August at Tudor, Pickering, Holt & Co. Securities Inc.'s annual "Hotter-N-Hell" conference, named for its summer venue (Houston) and for its charged dialogue. Analysts call pressure pumping "a lightning-rod topic."

"There are a ton of questions around capacity, and the outlook was decidedly negative," the team reports. Estimates at the time were that 40% of the 2- to 3 million of new-build HHP that is on order is replacement HHP and not incremental, as today's intense frac jobs are destroying equipment.

"It's not just flow rates that are truncating equipment life," the TPH group reports. "Sand is very corrosive, so even low-rate pump jobs tear through pumps based on the amount of proppant used in horizontal fracs."

They agree that new HHP on order won't satiate demand. "Horsepower oversupply is coming—just not yet."

Bill Herbert, managing director and co-head of research for Simmons & Co. International, says that growth in drilling activity is flattening out, and new entrants to the oilfield-service space are producing some price and capacity relief. But, operators' access to capital remains unrestrained, he adds.

"The North American E&P cycle continues to climb a wall of worry."

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