• DCube(Demand Database): Historical and forecasted opex and capex for global oil and gas fields, split on supplier segment and geography
In the latest DCube version (March 2015) we see short term purchases relatively unchanged compared to January and February. Allthough the oil price have rallied the latest days, we still assume our 2016 spending numbers to be representable as we believe in an average oil price of 47 USD/bbl for 2016.
• SCube(Supplier Database): Reported revenue from oil service companies split on the same supplier segments and geographies as DCube
The Q1 2016 version of SCube shows that revenues among service companies fell 20% offshore and more than 30% onshore in 2015. This have caused large changes in the market shares among service companies.
• RigCube (Rig Demand & Supply Database): Global, offshore rig demand (rig count) and supply based on bottom-up, field-by-field activity analysis
Offshore drillers still face a challenging future. The Q1 2016 RigCube version shows that the demand for floaters in 2016 will decrease by 21% compared to 2015. For jack-ups the demand will fall by 8%.
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The oilfield service landscape has changed dramatically during the downturn in the oil and gas industry. Market consolidation coupled with large differences in service segment growth worldwide have caused market shares to alter drastically in 2015 and 2016. The market concentration is increasing while companies feel the pain and the gain of market shares.
*Cameron revenues for 2016 fully incorporated; **Assumes the acquisition of Baker Hughes is completed and divested product lines are acquired by GE
In 2014, the three largest service companies held 20% of the market share among the top 400 service companies. In 2016, the same 20% market concentration could end up in the hands of Schlumberger and Halliburton alone. The five largest service companies in 2014 had significant exposure to Well Service & Commodities and regionally to North America, where the shale industry was at its top. Over the course of 2015 and 2016, when shale was hit hardest, these companies lost a large market share. To dam up for this, diversification to other segments, bringing out market synergies, has been a key goal in the large acquisitions for top players. Schlumberger’s acquisition of Cameron that has been finalized helped Schlumberger to maintain the largest market share. Halliburton’s acquisition of Baker Hughes is facing increasing resistance; however, if it is completed and if GE goes through with the acquisition of the planned divested product lines, we would end up with a completely new ranking in 2016. GE would climb from eighth place to third place, while NOV and Weatherford would lose their standing to both Saipem and Technip. These two would reclaim their positions as fourth and fifth respectively, the standings they lost in 2006.
The potential outcome of EPCI and subsea companies getting closer to the number one spot in the market share ranking is a result of a large international presence coupled with products that sit later in the value chain. By forming alliances, these companies have connected with subsea equipment companies and are in a strong position to solidify their market share. In terms of the Herfindahl index - the measure of market concentration - the top 400 service companies in 2016 have a HH-index of 277 compared to 233 in 2014, which is a significant increase.
Examining how market share has changed throughout 2015 and how service companies are likely to perform in 2016 helps us analyze the companies with the strongest foothold. Saipem, Technip and Petrofac gained market share in both years as their revenues decreased less than for other service companies. Technip will take more market share than Saipem with a combined growth of 100 basis points and Saipem with only 65. GE did increase its market share by 33 basis points in 2015, and it could further increase by 117 basis points if allowed to acquire the HAL/BHI assets. Offshore drillers achieved increased market shares in 2015 due to termination fees, but this will “hit back” in 2016 with fewer rigs operating. The companies in the second quadrant in Figure 2 are the companies that lost market share in 2015, but could potentially win some back in 2016. Vallourec, Tenaris and TMK fell early due to the full stop in stocking of OCTG inventories. Land drillers in North America, such as Nabors and H&P, are worst off, as market shares will drop in both 2015 and 2016 as rig count continues to fall.
As the market is expected to deteriorate for Subsea and EPCI, the double gainers will have a hard time continuing the trend organically. As the oil price is expected to increase from 2017 and onwards, the losers of the downturn, with the right exposure, are expected to grow faster, threatening the standing of the newly claimed positions. It is only Schlumberger and potentially Halliburton and GE that seem to have the best newly won market composition to fight for the top spot on the podium for oilfield services.