Services companies hone their strategies as the offshore sector starts perking up.
Providers are offering one-stop shopping to increase efficiency
Houston companies Baker Hughes and McDermott International have formed a partnership to offer a suite of energy services to offshore oil and gas developments as a way to compete with growing competitors such as Schlumberger and TechnipFMC.
The agreement between Baker Hughes and McDermott is another example of the changes sweeping through the offshore sector as the industry consolidates and energy services companies seek ways to lower costs and help producers with rivals in U.S. shale plays in an era of lower prices. The trend among offshore specialists is to offer discounts to clients that buy a package of services, from engineering to construction to equipment manufacturing
That strategy underpinned the merger last year of the French company Technip with FMC Technologies, integrating FMC’s expertise in manufacturing equipment with Technip’s installing it. Schlumberger, the world’s biggest energy services provider, pursued a similar strategy with its 2015 acquisition of Houston’s Cameron International and the joint venture launched earlier this year Subsea 7, a London company. The goal: provide onestop shopping for offshore producers.
“Increasingly, industry players are looking for commercially innovative business models and integrated offerings that help reduce costs, while increasing efficiency and productivity,” said Graham Gillies, vice president of subsea production systems and subsea services at Baker Hughes.
Baker Hughes and McDermott last week announced their first joint project, which will provide integrated front-end engineering work for British oil major BP’s latest West Africa offshore development, off Senegal and Mauritania. It comes as both companies work through recent mergers.
Baker Hughes is still integrating the operations of the old Houston oil field services company Baker Hughes and the oil and gas division of the industrial conglomerate General Electric of Boston, which owns about two-thirds of the combined company. The merger closed last year.
McDermott is expected to close its recent acquisition of the construction and engineering firm CB&I in the next quarter.
James West, an energy analyst with the research and advisory firm Evercore ISI, said the Baker HughesMcDermott partnership is an example of what services companies will need to compete with Schlumberger and TechnipFMC, the leading services providers to offshore productions. He said Baker Hughes, also one of the world’s biggest energy services companies, has moved more quickly than expected to take on its larger offshore rivals.
The offshore sector has generally recovered more slowly than onshore segments of the industry, particularly shale drilling in oil and gas fields such as the Permian Basin in West Texas, where profits can be made with lower crude prices.
But higher oil prices are helping to generate new activity for producers and eventually services companies. Several of the world’s biggest oil companies, including Chevron Corp., Royal Dutch Shell, BP and Total, have recently announced significant deepwater finds in the Gulf of Mexico and North Sea.
The offshore sector has generally recovered more slowly than onshore segments.