Oilfield Services Poised for Transformation

Oilfield Services Poised for Transformation
Here is a preview of what to watch this week in the oil and gas markets.

(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author.)

Lasting changes are likely on the horizon in the oilfield services and equipment industry, predicts one of Rigzone’s regular market-watchers. Read on to find out why, along with other perspectives, in this week’s installment of what to watch in the oil and gas markets.

Tom Curran, Senior Energy Services and Equipment Analyst in Equity Research, B. Riley FBR, Inc.: Among the bigger, multi-offering players, Schlumberger (NYSE: SLB) isn’t alone in a strategic decision to pare back to product/service lines (in a deal with Liberty Oilfield Services) (NYSE: LBRT) expected to sustainably generate acceptable returns. Baker Hughes (NYSE: BKR) has undertaken a comprehensive overhaul of its own suite of offerings. On Sept. 8, 2020, at a Wall Street conference, Lorenzo Simonelli, Chairman, President and CEO of Baker Hughes, said:

In terms of portfolio actions, we have recently agreed to sell non-core businesses like rod lift and specialty polymers and we’ll continue to evaluate the portfolio. In addition to divestitures, we have shut down low-return and non-core product lines in the U.S., like full-service onshore drilling and completion fluids, cased hole wireline, and frac plug operations … Given the pace of commoditization across some product lines,in  order to achieve our return requirements, we intend to make additional rationalization efforts going forward. These actions will be primarily focused on our OFS (oilfield service) and OFE (oilfield equipment) product companies and will consist of divesting or exiting non-core product lines or operations in certain geographies where the market structure may not allow for adequate returns.

We’ll be highly attentive to news flow around these Baker rationalization moves given what they could mean for certain interested acquirers and how they’re likely to transform the competitive landscape and dynamics of specific markets.

Tom Seng, Director – School of Energy Economics, Policy and Commerce, University of Tulsa’s Collins College of Business: As we approach the peak of hurricane season, all eyes will be on the tropics and the Gulf of Mexico to see what level of activity, if any, we can expect for the rest of the season. Also, while China recently cut back on oil imports in July and August, tanker-watchers are indicating that the world’s largest importer of crude is contracting for more shipments here in September.

Barani Krishnan, Senior Commodities Analyst at Investing.com: The question is has the selloff in oil been exhausted? If not, how low could it go? That’s what we need to watch.

Marc Le Dain, vice president of strategy with the oil and gas data firm Validere: LNG exports from the U.S. have returned significantly post the hurricane (Laura), hitting the highest levels in a few months. This should start showing up in gas storage numbers this coming week.

Refinery demand needs to start returning in this coming storage report. Recent refinery demand has been week and the market is feeling out how much was hurricane-related and how much is driven by increasingly poor refining margins.

(EDITOR’S NOTE: The statements in this article attributed to Baker Hughes' CEO are part of a presentation he delivered at last week’s Barclays CEO Energy Conference.)

To contact the author, email mveazey@rigzone.com.




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