OIL FIRMS REBOUND
After a four-year lull, firms to develop offshore fields.
glut of rigs and vessels. The worst performing segment in offshore last year, should improve at last, Mr Martinsen said.
London-based oilfield services provider Technipfmc Plc forecast that 2019 revenue at its subsea division will climb but margins could fall. This year, the company is anticipating “continued strong activity” for investment decisions in small-to-midsize projects, and “an increasing number of the larger greenfield subsea projects,” chief executive Doug Pferdehirt said in December last year.
“A lot of these offshore projects are located at deep waters, benefiting subsea gear makers such as Technipfmc and Subsea 7 SA,” Mr Martinsen said. While oil and gas companies press ahead with new developments, they may initially focus on already-discovered fields, while keeping a cautious stance on riskier exploration projects, for which returns are harder to achieve, forcing surveyors and drillers to send more vessels and rigs to scrap.
“With oil prices trading below $60 per barrel, there continues to be some uncertainty on 2019 E&P spending, particularly offshore,” Kristian Johansen, CEO of Norwegian oilfield surveyor TGS Nopec Geophysical Co ASA said.
However, TGS should benefit Kristian Johansen from its “solid balance sheet,” while Petroleum Geo-services ASA may face “challenges ahead in terms of an oversupplied seismic vessel market and approaching debt maturities,” Nordea analysts Glenn Lodden and Even Mostue Naume wrote in a note this month.
France's CGG SA should be more attractive once it completes a plan to shed its remaining seismic vessels — although restructuring takes time and the company may incur additional costs, the analysts said. A CGG spokesman declined to comment.
There should be a “slight rise in demand from drilling,” meaning that just 30 per cent of deepwater rigs may remain idle this year, down from 35 per cent last year, said Mhairidh Evans, an analyst at Wood Mackenzie.
“Some more overcapacity needs to be taken out of the supply chain.” Transocean Ltd, which last month announced an $830 million drilling contract, may benefit from the rebound as it focuses on deep water, while Shelf Drilling Ltd may also gain from its exposure to the Middle East, added Mr Martinsen. Petroleum Geo-services is “cautiously optimistic” that last year's market rebound will continue this year, a spokesman said. On the other hand, the market for equipment used on shallow water platforms such as pumps, turbines and heat exchangers provided by the likes of General Electric Co, ABB Ltd and National Oilwell Varco Inc may lag behind, partly because they tend to be ordered later in project cycles, Mr Martinsen said.
Bourbon Corporation, a French operator of support vessels for offshore industry, is also looking for signs of recovery as persisting low rates have forced it to suspend payments on its debt. Bourbon's situation is “worrying,” as it operates in an oversupplied market, said Kevin Vo, an analyst at Alphavalue in Paris. Bourbon declined to comment.
“As a company sanctions a project or an exploration campaign, that cash doesn't flow through the supply chain until perhaps one or two or three years, so the supply chain isn't out of the woods yet,” said Woodmac's Evans. “So 2020 looks like the year where many parts of the supply chain will start to feel better.”
The semi-submersible offshore drilling rig departs for South China Sea, where it will carryout oil and gas exploitation.