Rystad Energy has the great pleasure of inviting you to our Annual Oil & Gas Summit 2016, which is happening in conjunction with our regular user meeting. This year our key event will take place in Houston and London. Join us to hear about our up-to-date market analyses and overview, industry perspectives and data analysis discussions.
Article:United States now holds more oil reserves than Saudi Arabia
Article:Increased field decline on mature fields is becoming visible
RYSTAD ENERGY PRODUCT HIGHLIGHTS
Oilfield Service Databases
• DCube(Demand Database): Field-by-field coverage for the global oilfield service companies and their spending
In the latest DCube version (June 2016), overall purchases stay the same, but the P&A market has been increased based on the latest update of decommissioning plans.
• SCube(Supplier Database): Detailed insights into revenues of the largest oilfield service companies
Q2 2016 version of SCube shows that revenues among service companies continued to fall in 2016 as Q1 2016 reported revenues were 16% lower than those for Q4 2015. The fall varied across service segments and geographies, causing large changes in the company’s market shares.
• RigCube (Rig Supply & Demand Database): Insights into historical and forecasted global rig supply and demand
There are still challenges in the MODU market. Q2 2016 RigCube version shows that demand for floaters in 2016 will decrease by 24% y/y. For jack-ups, demand will fall by 14% compared to 2015 levels.
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The first half of 2016 has been tough for the oilfield service industry. The negative trends from 2015 continued into 2016 with further revenue decline, weaker margins and more layoffs. Nevertheless, the oil price has gradually increased since it bottomed out in January, indicating a turning tide for the oilfield service industry expected in H2.
For Q1 2016 companies reported a drop in revenue of 16% compared to Q4 2015. Seismic players faced the worst revenue decline, dropping by 22%, whereas companies exposed to maintenance and operations experienced a revenue drop of 9%. As companies will start to report their Q2 numbers in late July, we expect a further fall in earnings by approximately 10%. This will be the last quarter with double-digit drop, and we may see revenues beginning to increase in Q3 this year.
As revenues decreased, service companies tried to keep their margins by cutting costs. One way to do this has been through layoffs. In 2015, approximately 22% of the work force within the industry was cut. So far, we have seen additional 7% layoffs in 2016.
Another way to reduce costs has been to form alliances, making the companies able to offer integrated services for the whole value chain and avoid unnecessary complexity and risks. Some of these alliances have also materialized in M&A such as Schlumberger’s acquisition of Cameron (OneSubsea) and the Technip and FMC Technologies merger (Forsys Subsea). We have also seen the announced merger with Halliburton and Baker Hughes failing due to lack of regulatory approvals. These alliances and mergers have changed how the market operates. Schlumberger has strengthened its position as the largest player, while TechnipFMC could now position itself as the second largest oilfield service company.
The current challenge in the oilfield service market is also evident in the world of mobile offshore drilling units (MODUs), which is one of the service segments most affected by the downturn with a record decline in 2015.
Halfway into 2016, we have clear signs of the challenges facing the floater market this year. A large number of contracts have been terminated and further investment decisions are pushed back. We expect the current year to end with a reduction in floater demand by 24% from 2015’s level, an equivalent to a drop from 226 units to 172 in 2016.
Looking into 2017, we see a more stabilizing market after two years of turmoil with substantial decline. As the oil price is expected to rebound, we anticipate a recovery of the floater market towards 2020.
Gross utilization levels are declining further into 2017, assuming no further retirements. However, there is a need to continue the current retirement cycle in order to contribute to better market conditions and reduce the oversupplied floater space.