OGJ Senior Staff Writer
HOUSTON, Dec. 21 -- Rising oil prices, unconventional gas drilling in the US and Canada along with offshore projects worldwide appear likely to drive recovery for oil and gas service providers during 2011 despite the major setback of the 2010 drilling moratorium in the Gulf of Mexico, analysts said.
A special IHS Herold report, entitled “Review on the Oil Field Services Sector,” forecasts a healthier growth outlook for oil and gas service companies in 2011 than what those companies faced in 2010. The review compared key oil company financial performance against performance for service companies and offshore drilling contractors.
“Many of the service companies, and in particular the offshore drilling companies, took a financial beating following the gulf drilling moratorium,” said John B. Parry, principal energy analyst at HIS and author of the special review.
A federal moratorium on offshore drilling temporarily was imposed after the Apr. 20 Macondo well blowout and subsequent oil spill in the gulf. BP PLC operated Macondo. An explosion and fire on Transocean Ltd.’s Deepwater Horizon semisubmersible resulted in the deaths of 11 workers.
The wellhead in 5,000 ft of water was temporarily capped on July 15. A relief well was drilled and the well permanently sealed. The moratorium has been lifted but the return to drilling in the gulf is expected to be slow as operators and drilling contractors fulfill new federal certification requirements.
IHS CERA previously said six deepwater rigs have departed the gulf and the number of new wells drilled in shallow water fell sharply.
Major service providers fared better than offshore drillers, who either saw declines in revenue or marginal revenue growth, Parry noted.
“Current forward earnings estimates suggest a potential restoration to prior peak 2008 stock price levels by 2012,” Parry said.
For instance, Baker Hughes Inc. reported $9.9 billion in revenues for the first 9 months of 2010 compared with $7.2 billion in revenue during the same period of 2009. Halliburton reported revenues of $12.8 billion compared with $10.9 billion for the same periods.
Cameron International said its revenues were $4.3 billion for the first 9 months of 2010 compared with $3.7 billion for the first 9 months of 2009.
Shifting resources to meet strong demand for US onshore drilling and other international projects helped many service companies keep their earnings on a positive flow, Parry said.
In its mid-year 2010 earnings conference call, Baker Hughes said it responded to the gulf drilling moratorium by redeploying people and equipment to US land operations and to international offshore markets.
Baker Hughes noted high demand for hydraulic fracturing crews in the US and Canada and rising frac prices has led to a strong backlog for pressure pumping, with wait times of 90-180 days for customers. Operators also have reported frustration with the cost and availability of fracing services (OGJ, Dec. 6, 2010, p. 40).
In its third-quarter 2010 earnings call, Halliburton said the shift toward liquid-rich plays will lead to continued growth in overall activity for its US land business. Halliburton transferred 400 people from the gulf to other regions worldwide.
Halliburton also said it “hired over 6,500 new employees in the US since the beginning of the year, creating a significant number of new jobs.”
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