TOLWF - Servicing Cost Inflation Is Real Tier 1 Drilling Location Depletion Is Real So Production Growth Will Be Limited
- Servicing cost inflation is real and it will rise by 15% to 20% this year.
- Oil companies both in the US and Canada will have to raise capex in order to maintain their previously announced capex budgets.
- The shortage in labor and parts will last at least another 12-18 months. The price increase will have to result in higher wages offered, and this takes time.
- More and more oil and gas companies will have to direct capex budgets to de-risking inventory. Tier 1 locations are not as abundant as you think, so growth trajectory is limited.
- If you are looking for oilfield servicing exposure, we would go with XES, OIH, and TOLWF.
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Servicing Cost Inflation Is Real, Tier 1 Drilling Location Depletion Is Real, So Production Growth Will Be Limited