OIL FIRMS RE­BOUND

After a four-year lull, firms to de­velop off­shore fields.

The East African - - BUSINESS -

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.”

Pic­ture: File

The semi-sub­mersible off­shore drilling rig departs for South China Sea, where it will car­ry­out oil and gas ex­ploita­tion.

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