The smaller oilfield service (OFS) companies, like ProFrac Holdings, have not experienced the same rally in stock prices as the major players in the industry, such as Halliburton and Schlumberger. However, analysts predict a bright future for these smaller companies, with potential stock increases of up to 26% based on market dynamics and performance indicators.
The recent increase in oil prices has led to an uptick in drilling activity. Producers have shifted their focus to oil prices remaining above $80 per barrel, leading to a net increase of 9 rigs going back to work last week. This reversal of fortune has created opportunities for smaller OFS companies like ProFrac Holdings.
ProFrac Holdings has strategically consolidated its market share through key acquisitions. By acquiring companies like Rev Energy Services, Producers Services, and U.S. Well Services, ProFrac has not only increased its market share, but also gained access to new technology, such as electric frac technology.
In addition to acquisitions, ProFrac Holdings has also consolidated the sand market by purchasing multiple sand companies. This has not only improved logistics for ProFrac in key plays, but has also encouraged operators to bundle sand and pumping services together. Sand contribution margins have reached 5-year highs, making this a profitable move for the company.
Currently, ProFrac Holdings is estimated to have about 12% of the North American pumping market. This aligns with an analyst’s estimate of 35 active fleets in Q2. With the increase in drilling activity, it is expected that ProFrac will see further growth and potentially higher stock prices in the future.