RYSTAD ENERGY PRODUCT HIGHLIGHTS Oilfield Service Databases • DCube (Demand Database): Historical and forecasted opex and capex for global oil and gas fields, split on supplier segment and geography
The latest DCube version (January 2015) reflects that short term oilfield service demand is taken down from -1.8% to -4.6% as the 2015 outlook is more pessimistic than observed in December 2014.
• SCube (Supplier Database): Reported revenue from oil service companies split on the same supplier segments and geographies as DCube
The latest SCube version (December 2014) provides extensive details on the different service companies outlook. There is a significant spread in the revenue forecasts, and SCube is ideal to analyze quickly potential market consolidation such as the HAL+BHI deal.
• RigCube (Rig Demand & Supply Database): Global, offshore rig demand (rig count) and supply based on bottom-up, field-by-field activity analysis
As per our latest RigCube version (December 2014), shows, the oil price drop have a big impact on the offshore drillers. 2020 floater demand is estimated to 379 units (406 in October version). 2015 floater demand is estimated to 268 units (263 in 2014), 2% increase from 2014 demand.
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2014 marked the end of stable high oil prices and record-high oilfield service demand. A 55% drop in oil prices has resulted in a short-term pessimistic outlook for the oilfield service industry. However, the turning point is in sight for those that are exposed to the right segments and regions. Seismic, Well Services and Commodities may experience the first positive growth already in 2016.
As far as revenues are concerned, 2015 is going to be a challenging year for the service companies. The demand for oilfield services will decrease by, on average, 8% compared to 2014 as macro fundamentals suggest that the oil price will average at 50-60 USD/bbl in 2015. Consequently, an important question arises: when can oilfield service companies expect the market to turn?
Estimating the timing of the next growth cycle is not trivial, but relevant indicators can be observed through analyzing the supply-demand balance for liquids. Assuming no voluntary supply cuts, Rystad Energy estimates that an oil price of 60 USD/bbl for 2015 will take down the supply growth in the second half of 2015 which in turn would lead the market to balance in 2016.Based on this, Rystad Energy expects the oil price to climb towards 70 real USD/bbl in 2016 and 80 real USD/bbl in 2017, which would ignite new investments.
The E&P companies’ willingness to sanction new projects and commit new greenfield capex is at the lowest level since 2003. Roughly 170 USD billion of capital expenditures is expected to be directed to new greenfield projects in 2015. This is a reduction of 40% compared to 2014 when it was 290 USD billion. Both offshore and onshore have had tremendous growth since the early 2000s. A tripling of the oil price led to massive exploration and development activity offshore and unlocked unconventional resources such as oil sands, heavy oil and shale volumes. Mega project execution and E&P cash conservation led to a downward trend in new capex commitments from 2011 to 2014. Both 2015 and 2016 will be years in which the companies reduce their new investments to a minimum. Onshore could increase somewhat into 2016 as any signs of a higher oil price can materialize into new investments the same year. Offshore will have a comeback in 2017, when it is expected that new offshore resources are vital to meet the demand for liquids.
By analyzing every single upstream project worldwide and its current viability based on Rystad Energy‘s oil price forecast, we can paint the picture for oilfield service outlook across different regions and segments. The first regional market to respond to an oil price recovery is the North American market that may see flattish growth already in 2016. North American shale developments can act as a swing producer, and can cause high volatility in the oilfield service demand in 2015. The first to be hit and the first to recover are the well service and commodities market together with the land drillers. The second regional market to react with positive growth is Africa and Middle East. There will be limited spending cuts in some of the OPEC countries as they will continue at the same speed to test the liquids supply response. When the market eventually balances, they will continue their stable investments to defend market shares and keep their production capacity. South America, Asia and CIS will improve later in 2016 towards 2017, as these regions consist of a large offshore market which cannot respond as fast. The first markets to improve are subsea and EPCI. The last regional market to react is the European oilfield service market. Here, no positive response is expected until 2017. New large subsea and EPCI projects will kick off toward the end of the decade but the offshore drillers will struggle long-term with contracted lower day rates.
Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy advisory and research products for E&P and oil service companies, investors and governments. We are headquartered in Oslo, Norway, with additional research teams in India. Further presence has been established in the UK (London), USA (New York & Houston), Russia (Moscow), for Africa as well as South East Asia.