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IHS Herold Review shows positive results for services sector

Oilfield Technology,


A special IHS Herold Review on the oilfield services sector issued this month indicates a healthier growth outlook for the industry in 2011, despite being hard hit by the Gulf of Mexico (Gulf) drilling moratorium in 2010. A general recovery is being driven by rising oil prices, unconventional drilling in North America and multiple opportunities offshore worldwide. The review, which compared key oil company financial performance for the first nine months of 2010 against sector performance for same period in 2009, included both multiservice companies such as Baker Hughes, Halliburton and Schlumberger as well as offshore drillers Transocean, Diamond Offshore and Oceaneering International, among others.

Multiservice providers doing well

Baker Hughes led the pack of multiservice providers, with a 38% increase in revenues (US$ 9.9 billion in 2010 versus US$ 7.2 billion in 2009) during the first nine months of 2010 as compared to the same period in 2009, followed by Halliburton, which posted a 17% increase in revenues for the same period (US$ 12.8 billion versus US$ 10.9 billion); and Cameron International, which saw its revenues rise 15% during the period (US$ 4.3 billion versus US$ 3.7 billion in 2009). Of the six leading companies covered in the sector, only National Oilwell Varco posted a revenue decline (6% or US$ 8.9 billion in 2010 versus US$ 9.5 billion in 2009), but its earnings advanced 14% to US$ 1.4 billion.

Challenges still exist

Shifting resources to meet strong demand for US onshore drilling and other international projects helped many service companies turn the earnings tide back to a more positive flow.

While overall earnings growth for the sector is a positive sign for the industry, the IHS study noted, post moratorium challenges still persist, since a return to drilling has been slow. This has fed a general decline in rig utilisation rates while new build rigs continue to enter a sluggish market.

According to the IHS CERA UCCI, upstream construction costs rose 3% in the past six months after bottoming out during the previous six month tracking period. In deepwater, six rigs left the Gulf for projects elsewhere, but the remainder stayed under contract and sat idle while waiting out the moratorium.

The report mentions that idle rigs and a backlog of new rigs leaving the construction fields will lead to a softening of the rig market for the time being.

Consolidation is rife

The author of the report, John B. Parry said. ‘For these companies to continue to help meet the changing competitive and technological requirements, particularly for offshore drilling, we see ongoing consolidation as part of the mix. In 2009 and 2010, our energy mergers and acquisitions team tracked more than 80 transactions in the oilfield services sector, valued at nearly US$ 40 billion. We expect that number is likely to remain healthy in 2011.’

Read the article online at: https://www.oilfieldtechnology.com/exploration/17122010/ihs_herold_review_shows_positive_results_for_services_sector/

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