ОБЪЕДИНЕНИЕ ЛИДЕРОВ НЕФТЕГАЗОВОГО СЕРВИСА И МАШИНОСТРОЕНИЯ РОССИИ
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Среда, 12 декабря 2018 17:01

Rystad Energy: Oilfield Service Newsletter - December 2018 - eng

Oilfield suppliers embarked on road to recovery in 2018

Fueled by higher oil prices, but also by significantly lower costs, activity levels in the global oilfield service industry took a vital step up in 2018, providing a lifeline for many malnourished contractors.

At the outset of this year, Brent prices were in the region of $60 per barrel, having rallied from around $50 six months earlier. A renewed sense of optimism was reflective of the significant increase in oil companies’ 2018 upstream expenditure budgets compared to the three previous years. Exploration and field development plans were back on the table, and the oilfield service market could finally get back to business.

The first quarter of 2018 went very well, as gross revenues for the service industry grew 10% year on year. Well services and commodities grew as much as 26%, driven to a large extent by the 42% growth in the number of horizontal wells drilled in the US, which reached 3400 wells that quarter. In addition to increased activity, there was also higher completion intensity of sand per foot, and horsepower-hours per well, which helped to pull North American OFS revenues up by 9% quarter over quarter. A flurry of offshore field sanctioning at the very end of 2017, driven in no small part by large discoveries in Guyana, laid the foundation for an offshore comeback later in 2018.

The second quarter maintained the momentum, as revenues grew 7% against first quarter levels. This time it was Europe showing higher growth, quarter on quarter, than the North American market. The subsea market, along with maintenance & operations, were the service segments with the highest growth. Subsea 7, Saipem, McDermott, Fugro and Oceaneering were among the offshore contractors with the highest contribution to the blended growth rate.

Surging demand in the US led pressure pumpers to raise prices, culminating in 22% margins that eclipsed even 2014 levels. Of even greater significance to the market was the Trump administration’s decision in May to re-impose US sanctions against Iran, which saw Brent Blend prices climb to around $70 per barrel. This move effectively dismantled a booming Iranian oilfield service market, knocking out 35% of anticipated revenues, whereas elsewhere the resultant rise in oil prices led many E&P companies to lift spending plans even higher.

With this backdrop, third quarter OFS revenues grew 6% year on year, with the subsea market leading the way. Just nine months into the year, more offshore projects had been sanctioned than in all of 2017. One of the beneficiaries was the FPSO market, which stirred back to life after a lengthy hibernation. Many offshore service companies replaced employee cuts with recruitment campaigns as their order books swelled.

The fourth quarter of 2018 has seen unit prices in many of the offshore segments continue to improve. The famine is over for key regional jack-up markets and day rates have improved. In the US Gulf of Mexico, for instance, rates are back at the $80,000 per day mark. The standardization of offshore production platforms means cost cuts can still be realized by operators despite increased unit prices. Investors should appreciate the wave of projects to be sanctioned over the next years, although there are significant variances amongst the majors.

Although 2018 has generally been a good year for the oilfield services sector, there were some notable negatives. Several major projects have been postponed, including Uganda’s prestige development of the Lake Albert oilfield, where project sanction has been delayed until next year, thus stalling $8.5 billion in awards. Such delays, along with changes in the macro-economic environment and the steep decline in oil prices seen over the past two months, have led us to revise our original forecast of E&P spending for this year. Out latest estimate is that shale investments will grow 22% while offshore investments appear set for a drop of 9% in 2018, but with 94 projects sanctioned during the year.

For 2019, we expect offshore investments to grow at an average of 2% and finally spawn an increase in revenues for offshore exposed service companies. We forecast that more than $200 billion worth of projects will be sanctioned next year, including as many as 100 offshore projects, thus setting the scene for higher service prices. In the shale industry, investments are likely to rise by 8% while spending in other onshore markets is projected to grow by 1%. Geographically, the greatest growth is anticipated in Africa, South America and the Middle East, as greenfield activity picks up in Mozambique, Brazil and Saudi Arabia.

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