Oilfield-Services Companies Looking at Boom Times?

Offshore areas and new fields need attention even as some existing operations struggle to get enough equipment.

Dow Jones Newswires (Sider) reports that while growth in oilfield-services companies’ revenues has stalled recently, analysts are predicting a comeback in response to new circumstances. The article states that “last year, Schlumberger Ltd., Halliburton Co. and Baker Hughes Inc. were challenged by an oversupplied market for fracking services, a pullback in drilling by producers nervous about commodity prices, and the high cost of some materials … This year, though, analysts consider these companies are poised for takeoff…The reason is that domestic exploration and production companies may have pulled back too much at the end of last year, and might have to ramp up drilling to hold on to precious shale acreage in early 2013. Also, rigs are becoming more efficient, allowing more wells to come online that need to be fracked and completed, padding the profits of these large oilfield-services companies.”

Kyle Wade, a partner with Copia Capital LLC in Chicago, said some investors who had been wary are rushing to buy back into these companies before they become too expensive. “When you look at Schlumberger and Halliburton, that's clearly where people are afraid they're going to miss the cycle,” Wade said. “You've got actual panicked buying” by some funds, he said.

At least one private equity firm agrees. AMEInfo  reports that “Gulf Capital, one of the leading and most active private equity firms in the Middle East, announced that it has invested in a significant majority stake of OCB Oilfield Services, the leading oil & gas crew supply and related logistics provider in the Middle East, South East Asia and Africa … The global market for offshore crew supply and related services (excluding North America) is estimated to be in excess of $1bn annually. This includes crew supply to the different rig types: jack-ups, semi-submersibles, platforms, tenders, drillships, drillbarges and inland barges. In the Middle East, South East Asia, and Africa region, the sector is expected to witness double digit growth over the next five years, in line with significant increases in offshore oil & gas production and capital expenditures.”

In related news, because of expected demand for oilfield-service equipment, Fox Business (Fick, Dow Newswires) reports that Brazil’s Petrobras asked Brazil's National Petroleum Agency (ANP) to reduce the amount of local goods and services for 34 separate items related to offshore and onshore exploration and development. “The minimum percentages of local content for the cited items and subitems cannot be met by the national supply chain,” Petrobras said in its request. According to the article, the country's nascent oilfield services industry is struggling to meet demand, from drilling rigs to pumps and valves.