Carlyle OFS Exec: It's Dangerous to Declare Industry in Recovery
An uneven recovery is taking hold of the oil and gas industry, and if folks don’t realize that some sectors continue to struggle, industry exuberance can quickly retreat to the downturn’s despair.
Stuart Page, principal in oilfield services and equipment at The Carlyle Group, said taking the same approach to the post-downturn economy as the one that led to plummeting commodity prices will imperil the industry.
“I think it’s dangerous that we’re all looking at this as the new recovery. If everybody thinks the same thing, we’re all going to apply the same [excessive] valuations, we’re going to end up with the same problem all over again,” Page said during a panel at the Louisiana Energy Conference in New Orleans on May 31.
“This time, if we call it a recovery, it’s very, very specific to who’s recovering. The unconventional space in the Permian is great, but if you’re a conventional producer somewhere much less popular, life is not so great. If you’re an oilfield service company offshore, it’s tough times still, and no recovery in sight.”
As production at unconventional plays heats up, pressure is on for oilfield service providers (OFS) to re-equip and staff their crews. And generally, their bills to the exploration and production (E&P) companies are going to increase, but Page said the rate is still unknown. The OFS sector collectively says a cost increase of up to 20 percent is necessary this year; some E&P companies exploration and production companies are balking at such a hike.
“I see this big gulf between the E&P companies and the service companies,” Page said. “We’ll see who wins.”
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