Coiled tubing is one of the many services provided by oil service companies to customers along the entire life-cycle of the well. The industry is set to increase capacity in this business in 2011 as operators seek to maximize reservoir performance. (To learn more about oil, check out The Industry Handbook: The Oil Services Industry.)
What Is Coiled Tubing?
The term coiled tubing is used conceptually to refer to a range of downhole well intervention applications designed to enhance performance of a well. The term also has a literal meaning as well, since these services are provided via a continuous string of tubing that is inserted into the well.
The tubing used in these operations is typically made of carbon steel with diameters ranging from 0.75 to five inches. The tubing is spooled around a take-up reel for storage purposes and transportation to the well site. The length of the tubing can vary as well, with some as long as 33,000 feet in length.
The tubing, along with the reel, a power supply, control area and other associated equipment are combined into a unit and deployed to various well sites where services are needed.
Types of Services
One major use of coiled tubing units is to remove sand or other solid particles that have accumulated around the wellbore blocking the flow of hydrocarbons and reducing well productivity. Another coiled tubing function is to pump nitrogen into a well to displace wellbore fluid and allow a better flow of oil and gas. Other services performed include cementing, fracturing and acidizing of wells.
The Intervention & Coiled Tubing Association (ICoTA) estimates that there are 1,881 coiled tubing units deployed across the globe as of March 2011, with approximately 45% of these units located in the United States and Canada.
The large oil service firms dominate the world coiled tubing market in 2011, with a 32% market share on a unit basis. Halliburton (NYSE:HAL) operates 183 units, Schlumberger (NYSE:SLB) has 245 units and Baker Hughes (NYSE:BHI) has 181 units.
The ICoTA reports that there are 494 active coiled tubing units in the United States, up from 265 at the beginning of 2005. The industry is set to add another 85 units to this fleet during 2011. This represents capacity growth of 17% on a unit basis.
Other operators with large coiled tubing fleets in the United States include Superior Energy Services (NYSE:SPN) with 40 units, Key Energy (NYSE:KEG) with 43 units and Complete Production Services (NYSE:CPX) with 31 units.
Superior Energy Services has made major capital investments recently in this business and added seven new coiled tubing units during the first two quarters of 2011. The company also plans to add an eighth unit in the second half of the year.
National Oilwell Varco (NYSE:NOV) manufactures the steel tubing used by oil service companies to perform coiled tubing operations. The company reported in April 2011 that its facilities were running at maximum capacity, prompting it to add capacity.
The Bottom Line
The industry is planning to add a significant amount of coiled tubing capacity in the United States in 2011, and investors must determine if demand for the services these units provide is sufficient to absorb this new capacity. (To help you profit from oil, read Unearth Profits In Oil Exploration And Production.)
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