U.S. Markets open in 8 hrs 15 mins

Rystad Upbeat About Oilfield Service Providers

Irina Slav

Rystad Energy expects a strong performance from the oilfield service sector based on the first-quarter reports of the top three players in this field, which featured an average increase in income from oilfield services sales of 21 percent.

Schlumberger, Halliburton and GE Baker Hughes also reported combined revenue growth of 15 percent, in tune with Rystad’s expectations for the period. The consultancy expects the rest of the year to be strong as well, with improvement in oilfield equipment sales slower but present.

“With the great surge of activity in short cycle businesses – like U.S. shale and the slower-to-respond equipment market, typically in offshore – this will also be directionally in line with what we expect the trend to be in 2018 as a whole,” said Rystad’s vice president of oilfield service research, Audun Martinsen.

Rystad’s researchers are particularly upbeat about oilfield service providers with a presence in the U.S. shale patch for obvious reasons, and despite some delays in frac sand deliveries over the first quarter of the year. In fact, Rystad’s VP said, frac jobs are growing in number, hitting a high of 44 per day in February.

“The larger their exposure to the buoyant U.S. shale market, the larger the growth they are likely to report. Hydraulic fracturing in the various shale plays, for instance, is expected to grow by between 30 percent and 50 percent for 2018 as a whole,” Martinsen noted.

Outside the U.S., growth in revenues for the oilfield service industry will be slower but again, present. Europe and Africa will see the second-highest growth rate, at over 10 percent through end-2018, while oilfield service providers active in Latin America will actually book a decline of 1 percent in sales.

Related: The Bullish And Bearish Case For Oil

“For oilfield service companies, this year will be all about finding the right exposure to countries and product lines, sizing their capacity and weighting market share growth versus service pricing. There is still a battle out there among the suppliers to grab a share of the rise in activity, but this will come at a cost. Choices will have to be made between improving margins or improving revenues,” Martinsen said.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com: