An acquisition of Dutch engineering house GustoMSC by US-based drilling systems provider National Oilwell Varco (NOV) – as alleged today in an unconfirmed report by industry trade journal Upstream – would represent a good match and would consolidate NOV’s leading position in the market, according energy consultancy and data provider Rystad Energy.
GustoMSC is one of the world’s premier rig design companies. Data assembled by Rystad Energy indicates that GustoMSC has designed about 10% of the active global jackup fleet and 8% of the active floater fleet (semisubmersibles and drillships), placing it second behind only Friede & Goldman among rig design companies worldwide. In addition to GustoMSC’s rig design group, an acquisition would also give NOV two other key business units, focusing on jacking equipment and skids as well as other vessel designs.
“This, if confirmed, is a good strategic move by NOV, as it integrates more vertically. Combined with NOVs Rig Technologies business group – which delivers rig equipment and aftermarket sales – the company will position itself to control equipment design criteria to a larger degree,” says Audun Martinsen, VP of Oilfield Service Research at Rystad Energy.
NOV has historically been the world’s leading rig equipment provider, having delivered about 70% of all top drives, 45% of all drilling derricks and more than 25% of all BOPs for the active offshore drilling fleet. While NOV has been dominant in a fairly concentrated market, its market share has been reduced during this decade. Furthermore, the drilling market has contracted significantly since 2014 and the number of rigs being ordered and built has fallen dramatically. Under these circumstances, NOV’s Rig Technologies division saw its revenues drop by 80% from 2014 to 2017.
“Considering that the Rig Technologies division represented 55% of NOV’s entire revenue stream back in 2014, and that its market share has been reduced, the company needed to act,” Martinsen says.
Rystad Energy forecasts that the offshore rig market will remain oversupplied over the next five years, despite its expectations of a long term oil price in the region of $70. For 2019, Rystad Energy forecasts that oil company demand for drilling rigs will only provide work for 40% of the available offshore rig fleet.
“We don’t see any sign of improvement in the rig construction space, with the possible exception of some harsh environment units to be built on speculation. In this environment, NOV recognizes a need to boost its market share and to secure aftermarket sales to service a large proportion of the world’s GustoMSC-design rigs.”