The race is on. With WTI firmly in the $50s during the first few weeks of 2017, producers are gaining confidence at the breath of fresh cash flow that per-barrel value provides. Just look at the rush to add rigs. Near the beginning of February, some 730 land rigs were active in the U.S., as compared to a cycle low of 404 just this past May. That’s an 80% bounce from the bottom. That’s great news if you’re looking for a recovery.

And if you keep your ear to earnings calls, you’ll hear more rigs coming.

“We are impressed by the number of rig count increases signaled by a number of producers,” said Wunderlich Securities analyst Irene Haas in a Feb. 7 report. Wunderlich projects a 50% increase in spending this year by its companies under coverage.

But Raymond James analyst Marshall Adkins posits this question in a February report: “How much further can the U.S. rig count run before it runs out of steam?”

Well, that depends.

The perceived new floor on oil prices, revived E&P cash flows and the unfettered access to capital markets are certainly positives for an argument of more rigs, he acknowledges. Consider that today’s elevated rig count remains 62% below the peak in September 2014 of 1,931 rigs running.

Even factoring a flat oil price environment embedded in strip pricing, Raymond James expects strong cash flows and access to capital markets to continue. And if RayJay’s bullish 2017 oil forecast of $70 per barrel comes to fruition, spending would go even higher—say, 100% higher. That’s a whole lotta rigs.

Cash available to the E&P industry, said Adkins, “will be sufficient to perhaps double the U.S. rig count from current levels.”

Room to run. And run they will.

What might be the spoiler to a wide-open recovery? Alas, frack capacity.

Balance sheets, labor issues and drilled but uncompleted wells (DUCs) will be resolved “fairly quickly,” said Adkins, but frack equipment constraints will be the impediment to unrestrained oilfield activity, he predicted.

“The combination of increased frack intensity per well and pressure pumping equipment attrition will constrain the industry’s ability to respond to a rising oil price environment well into 2019 … By the second half of 2017, we think pressure pumping equipment attrition will hit the 80% utilization range where pricing surges and frack schedules become booked for months ahead of time.”

There just aren’t enough working frack fleets remaining to handle the coming surge in upsized demand. Adkins expects the pressure pumping shortage to last for two years.

And although he foresees no shortage in available rigs to meet the cash call, Adkins also doesn’t expect producers to drill into another glut of DUCs while waiting on frack fleets to show up. Instead, he believes a U.S. rig count of around 800 “will be the point where the wait for available frack capacity will slow the growth rate of the rig count.”

Count ’em—70 more rigs nationwide before the pressure pumpers start to hit the wall.

RayJay expects the rig count to hit 850 by year-end, thus overextending completions services, then a slowed growth into 2018 toward 1,100 rigs.

Haas’ comments seem to mirror the alert.

“It is clear the industry is getting past the troubles of the downturn and will have the growing pains of the upturn to deal with going forward,” she said. “As producers add rigs as promised, especially in second-half 2017, we expect logistical-related delays as oil service providers scramble to meet increasing demands for their services.”

Naturally, such an equipment shortage in the pressure pumping biz would lead to pricing increases, perhaps much higher than operators are anticipating.

“We believe oilfield pricing is poised to average about 30% higher over the next year,” Adkins warned, “meaningfully higher than most E&P companies and oilfield service analysts are modeling” as producers fight for available services.

The pricing surge will be driven by the costs of rebuilding and reactivating idled equipment as well as labor constraints.

“Put simply, equipment and labor shortages will likely drive pressure pumping pricing and margins back to 2011/2012 levels when pressure pumping deliveries were taking years rather than months.”

Unfortunately, while the service sector has been able to respond to incremental demand thus far, the scars of the downturn in the form of lost equipment and labor will inevitably limit the euphoria of the upturn. And perhaps that is a good thing, as putting too much oil on the market too soon in the void of OPEC cuts would likely sabotage prices once again.

Now the question becomes, who will get first dibs on available frack crews—and who won’t?

Get your frack on at DUG Bakken & Niobrara March 15-16 in Denver, and at DUG Permian Basin April 3-5 in Fort Worth, Texas. You’ll hear from operators, analysts and services companies on what’s hot, what’s not and what’s next in these resource-rich favorite plays.

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