It was the Big Picture that CEO Dave Lesar chose to focus on during Hal­liburton Co.’s recent earnings call. Instead of placing events in an admittedly “noisy” second quarter under the micro­scope, he declared that “the animal spirits are back in North America.” Balance sheet repair is still critical, he said, but pro­ducers are “thinking about growing their business again rather than being focused on survival.”

One customer told Lesar, “Dave, it’s actually a light at the end of the tunnel, and not an oncoming train.”

A stabilizing rig count is the first step in repairing margins, Lesar said, but produc­ers are already laying out plans for growth: to add rigs, buy assets or take actions that are “value-accretive.”

On a grander scale, Lesar referenced the likelihood of a “looming supply shortfall,” with most experts agreeing that 18 mil­lion to 22 million barrels of oil per day of new production would be needed by 2021—“meaning we have to find nearly two Saudi Arabias’ worth of production in the next five years.”

Following capex cuts of nearly $400 bil­lion globally over the last two years, the U.S. unconventional sector is likely to be “the first and deepest beneficiary of grow­ing supply shortages,” he said.

Obviously, that’s a far cry from current conditions, in which Lesar could project only “a modest uptick in rig count” for North America in the second half of the year, with an international market recovery likely to trail by six to nine months. But the news was clear: “The North America market has turned.”

Schlumberger CEO Paal Kibsgaard concurred, saying on the company’s earnings call that “we now appear to have reached the bottom of the cycle,” but making it clear that significant chal­lenges still lie ahead. With oil prices off their lows, the focus of the largest oilfield service provider is no longer on manag­ing decremental margins, but rather “fur­ther strengthening market share” so it can “recover the temporary pricing conces­sions” made during the downturn.

Given signs energy is moving “rapidly toward an increasing negative gap between global supply and demand,” oilfield ser­vice pricing must improve from currently “unsustainable” levels in order to underpin any planned increase in producer activity and offset cost inflation, Kibsgaard said.

“Whatever shape the recovery takes, service pricing must rise.”

What are the likely ramifications of large portions of the oilfield service sector operat­ing at below cash breakeven levels?

Accorading to Simmons & Co., going into the downturn “a hallmark of U.S. shale” was price elasticity, or the ability to “significantly and swiftly ramp up or ramp down production depending on the price signal.” In large part, this relied on a “highly productive oil service value chain” being in place to develop what is still “a vast inventory of drillable locations.” Com­ing out of the downturn, however, the scope of activity expansion looks increasingly in doubt, it said, as what once numbered easily 10 or more oil service companies possess­ing requisite size and operational flexibility has dropped to “fewer than five.”

An open question is the degree to which oilfield service costs will rise as producers receive the price signal needed to expand output. Relative to 2014 well costs, Apache Corp. estimates its well costs have fallen 45%, with over half due to savings in well design (10%) and drilling efficiencies (14%). These are viewed as structural, or permanent savings, as compared to the remaining 21%, which reflect heavy price discounting and are more cyclical.

While there is clearly spare capacity in actively marketed drilling and frack equipment and personnel, a recent Key­Banc Capital Markets’ survey on markets indicated some oilfield service companies have started talks with customers regard­ing pricing and the need to recover costs of re-activating and re-crewing idle rigs and frack fleets. Near-term growth in demand can be met with existing deployed capac­ity, but companies “simply will not re-activate their idle equipment for little or no margin.”

While signs point to a pricing recovery “possibly before year-end and likely by early 2017,” according to the KeyBanc sur­vey, it is drilling contractors who are seen as first in need of increasing investments in re-crewing and re-activating idle capacity, having immediately laid off all but a few of the most highly skilled crew members if a rig became idle with no prospect of further work. Now they are readying “call­back” lists.

So, if the turn gains traction, asked Key­Banc, could they end up “firing and re-hiring” in the same year? The answer: “It could happen in 2016.”