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The Fortune Cycle of Oilfield Services

Author: Steven Joseph
by Steven Joseph
Posted: Apr 27, 2019

Oil and Gas exploration takes place in some of the remotest places on Earth, having the harshest of environments. Oilfield services companies manufacture, maintain, and repair equipment required to set up oil wells. They also help in setting up oil wells. They do not themselves take part in the production. The oilfield equipment and services refers to all the services required for exploration and production of natural oil and gas. Hence, it is vital for oil field services companies to adapt to technology and gather engineering expertise to deal with the forces of nature.

Oilfield services companies are highly dependent on the price of petroleum. As the oil and gas industry goes through periods of boom and lull, the fortunes of oil field companies are also cyclic. The companies give crucial support to the operations handled by the oil and gas companies. Oilfield services companies are valued based on the economy during a particular business cycle. The activity level of the industry depends upon the levels of drilling activity in the oil and gas industry.

The oilfield services companies are of mainly two kinds; those that lease drilling rigs and those that provide services to construct and maintain oil and gas wells and provide seismic data. Oilfield companies like Schlumberger mainly focus their support to technology based services whereas others like Helmerich and Payne provide drilling services and equipment.

Rigs can be land based (onshore) or marine based structures (offshore). Drilling rigs can be of various types depending on the drilling technique and location. There are multiple varieties of rigs, each serving a different purpose. Land rigs are used to reach a depth of up to 30,000 feet whereas Jack Ups have a triangular platform that can be jacked up to rise above the highest anticipated wave. Submersible rigs are submerged to the ocean floor while the platform stays above water. Drill ships travel the ocean in search of oil.

The oilfield services provide many different services such as well intervention, wireline services, coil tubing, pumping pressure, etc. Each of these services is essential for the proper functioning and maintenance of the well, over its life span. Different oilfield services are required during the various phases of drilling, exploration and production.

Oilfield companies bore the brunt of the massive crash in oil prices during 2014. Many drilling companies scaled down their operations. Industry confidence was at an all-time low. Companies were forced to lay off workers. The scenario has since improved for the oil and gas industry. Consequently, the oilfield services industry is also benefitting. The level and direction of the oil and gas industry determines the direction and performance of the oilfield services companies.

The performance of the oilfield companies is indicated by the following factors;

Increased Drilling and Exploration

The Oil and Gas industry has been capable of undertaking more exploration and drilling in the past few years. The benefits of increased activity have flown directly down to the oilfield companies in the form of sufficient business in the recent times. When the oil and gas industry sees increase in price per barrel, the oil field service companies sees a rise in the number of jobs. A large number of wells are also being drilled for shale gas, especially in North America which requires the services of the oilfield industries.

However, strict environmental regulations are applied regarding some of the jobs undertaken by the oilfield services.

The type and location of the drilling also determines the revenue earned by the service companies. Historically, deep sea drilling in harsh environments have been earning at higher rates.

Support Services

As more and more wells are being explored around the world, the demand for evaluating, constructing and maintaining these wells is on the rise. These services bring in huge revenues for the companies.

Emerging Markets

Many abandoned oil wells are being reopened and new offshore markets are being explored providing new opportunities for the oilfield services companies. The availability of abundant offshore oil reserves and shale gas reserves provide the oilfield companies with opportunities.

Maximizing Benefits

As oil and gas industries are seeking technological advancements and working towards digitization to cut costs and increase productivity and effectiveness, the oilfield services companies cannot afford to be left behind. Digital solutions can improve operations and see the emergence of new opportunities. All oilfield service companies are investing heavily in the research and development sector to provide sustainable solutions to their clients and maintain an edge over competitors.

About the Author

I am a blogger, typically dealing with imaginative and futuristic concepts of advanced science and technology.

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Author: Steven Joseph

Steven Joseph

Member since: Apr 24, 2019
Published articles: 1

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