Upbeat industry outlook evident at OTC

Sam Fletcher
Senior Writer

HOUSTON, May 9 -- The 51,000 people who attended the annual Offshore Technology Conference in Houston on May 2-5—the biggest turnout since 1985—should be good news for crude market prices this year, said analysts in the Houston office of Raymond James & Associates.

"Historically, OTC attendance has tracked fairly closely with the price of oil," said analyst J. Marshall Adkins in a May 9 report. "This correlation has been remarkably good for nearly 30 years until this year." Prices have escalated sharply over the last couple of years, spiking above $50/bbl this year, while OTC attendance has shown more-gradual growth, although well above the 39,00-plus attendees it averaged over the previous 15 years.

Additionally, the number of exhibiting companies at the conference—2,087—"was near the highest level since 1985, indicating strong interest in the field," Adkins said. Still, he said, "It was evident that consolidation among the service companies has clearly reduced the number of medium-sized, technology-oriented oil service companies. This trend was especially apparent in the rig manufacturing area, where substantial market consolidation has occurred over the past several years."

Overall, Adkins said the turnout of exhibitors and attendees at this year's OTC was "evidence of the view of most in the oil patch that activity levels will continue to move higher over the next several quarters."

Like many others who attended the recent OTC, Adkins saw "a continuation of the technology evolution in progress, with very few (if any) new revolutionary designs." He said, "While we witnessed several new product unveilings at this year's show, we also saw many of the same gadgets and gizmos that have been around in the past couple of conferences."

Efficiency emphasized
"The common theme we took away from this year's OTC was the continued evolution of drilling technology, leading to increased efficiency in nearly all aspects of drilling. This includes everything from lower mechanical failure rates, significantly reduced drilling times through increased hydraulic horsepower, and better drillbit technology, and improved time and cost savings during rig moves," he said.

"It appears as if some of these technologies have begun to make a dramatic difference just over the past couple of years," Adkins said. "For example, we heard numerous stories about how increased hydraulic horsepower combined with better bit technology and fluid dynamics continues to significantly improve drilling times."

Despite an industry-wide trend toward drilling deeper and more difficult wells, improved drilling technology has increased the total footage drilled per rig per year. "The average footage drilled per rig has increased 12% over the past 5 years," said Adkins. "While the general footage trends are moving even higher, a Land Rig Newsletter analysis of the 75 most active rigs found that total footage drilled is increasing faster, up 10% [from the previous year] in 2004 and up 100% from a few years ago."

He said, "Clearly, advances in drilling have proved a benefit to both contractors and operators, as contractors are able to charge higher day rates for better technology, and operators are willing to pay higher day rates to more quickly and efficiently monetize their prospects."

Slow to adopt
Nonetheless, Adkins warned, "Investors should realize that the oil patch is notoriously slow at adopting new technologies. For example, National Oilwell Inc. [now the newly merged National Oilwell Varco Inc.] introduced the Hexpump at the OTC conference 4 years ago, but sales really began taking off only last year. While advancing technologies will drive superior long-term performance, most of the new technologies highlighted at the OTC will have little meaningful earnings impact . . . over the next year."

He added, "Some of the potentially 'revolutionary' technologies, such as electric subsea trees, intelligent drill pipe, fiber optic sensors, casing drilling, and expandable tubulars, will likely take years before they are commonplace in the oil field."

Prices rebound
While industry leaders were sharing technology and optimism at OTC, energy prices rebounded in world markets on concerns that refiners may not be able to meet rising product demand in the second half of this year. "This view was bolstered late in the week by better-than-anticipated US employment data, which indicated a strengthening US economy and thus was bullish for demand," said Robert S. Morris, Banc of America Securities, New York, in a May 8 report.

After declining by 8.6% the previous week, spot market prices for West Texas Intermediate bounced back from a 2-month low early in the week of OTC. In New York on May 6, the June crude futures contract climbed above $52/bbl before settling at $50.96/bbl.

(Online May 9, 2005; author's e-mail: samf@ogjonline.com)

Related Articles

MARKET WATCH: NYMEX crude oil price jumps more than $2/bbl

02/13/2015 Crude oil prices on the New York market jumped by more than $2/bbl Feb. 12 to settle above $51/bbl, which analysts attributed to more oil and gas c...

Apache’s 2015 capital budget less than half of last year’s $8.5 billion

02/12/2015 Apache Corp., Houston, plans a capital budget of $3.6-4 billion in 2015, with $2.1-2.3 billion directed toward onshore North America and $1.5-1.7 b...

Total reduces budget by 10% to $23-24 billion

02/12/2015 Total SA plans to lower its organic investments to $23-24 billion in 2015 from $26.4 billion in 2014 by reducing spending in brownfield development...

MARKET WATCH: NYMEX crude prices drop back below $50/bbl

02/12/2015 The New York Mercantile Exchange March crude oil contract dropped $1.18 on Feb. 11, closing at $48.84/bbl. The April contract dropped $1.15 to $50....

US House vote sends Keystone XL approval bill to Obama’s desk

02/12/2015 The US House of Representatives voted by 270 to 152 to pass S. 1, which would deem the proposed Keystone XL crude oil pipeline approved more than 6...

TransCanada challenges EPA’s comments on Keystone XL SEIS

02/11/2015 TransCanada Corp. responded to the Feb. 2 comment letter from the US Environmental Protection Agency on the US Department of State’s final suppleme...

PNR cuts capital spending nearly in half

02/11/2015 Pioneer Natural Resources Co. (PNR), Dallas, plans to spend $1.85 billion in 2015 following a fourth quarter in which the company reported a net in...

PACE survey finds 69% support for crude exports to trading partners

02/11/2015 More than two thirds of registered voters responding in a nationwide telephone survey commissioned by Producers for American Crude Exports (PACE) s...

EIA: US gasoline prices to average $1/gal less in 2015 vs. 2014

02/10/2015 US regular gasoline retail prices are expected to average $2.33/gal in 2015, down from $3.36/gal in 2014, according to the Energy Information Admin...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected