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Oil service costs could rise 15 percent this year, Wood Mac says

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As crude prices stabilize and drilling rigs dig into shale plays again, oil field service costs are beginning to rise back up. That could squeeze drillers’ margins later this year.

Energy research firm Wood Mackenzie believes oil field service costs could jump 15 percent this year overall, with prices for some equipment and services possibly rising as high as 40 percent, it said in a recent report.

Though oil field service companies aren’t likely to charge the same prices they got in 2014, before oil prices collapsed, they will probably get back market pricing power, Wood Mackenzie said.

Oil explorers all “voice the best intentions to keep a laser eye on costs,” said Jackson Sandeen, senior research analyst at Wood Mackenzie. “But continued productivity and drilling efficiency gains over 2016 will be difficult to achieve as operators pivot to a more aggressive development mode.”

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Written by Collin Eaton

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