Oilfield services at the start of 2016
According to research from international law firm Pinsent Masons, many senior executives within the oilfield services industry expect to see an increase in mergers and acquisitions over the next year. Out of 200 surveyed leaders, 86 percent believe merger activity will rise, while 70 percent said they were considering acquisition themselves.
Of those surveyed, 74 percent think international expansion will drive such mergers and acquisitions. The most attractive emerging markets were China, Indonesia, Mexico, Nigeria and Singapore. Meanwhile, 67 percent of respondents said they expect the U.K. will become the best of established markets over the next three years. Almost all respondents – 96 percent – feel the U.K. Continental Shelf will recover peak profitability over time.
David McKEwing, a partner in the oil and gas team at Pinsent Masons, said most of the conversation surrounding oil and natural gas has primarily been concerned with responding to an unpredictable economic climate. Still, he continued, the oilfield services industry is a crucial job provider and should be worth $144 billion by 2020. He also said the industry was a significant wealth creator.
“What our research shows is an industry on the cusp of transformation,” he noted. “
[Corporations] are clearly looking to build out their international propositions and invest in technology, which will maximize efficient recovery.”
Oilfield services feel pressure from falling prices
The price of crude oil has fallen more than 60 percent over the past 17 months, and oilfield services providers have been doing all they can to keep up, Reuters said. In some instances, prices for offshore services have been cut in half, and exploration and production rates have fallen as much as 35 percent.
Bill Costello, portfolio manager at Westwood Holdings Group Inc., told Reuters he thinks service prices can fall another 5 to 10 percent. He believes these companies can increase efficiency and use better equipment to cut costs by about 15 percent.
Despite the pressure, many are hopeful and believe greater efficiency and the adoption of new technology will ultimately benefit energy producers. Oilfield service companies should work to streamline production costs as much as possible in all areas, including administration, inventory management and payroll. There are customizable software solutions available to help companies achieve greater productivity across all areas of their business.
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