A new balance
By achieving a greater balance between chasing Capex development projects and Opex life of field, companies can also realise opportunities. Global IRM and integrity management work has been pushed to the right over the past 24 months, resulting in a backlog of integral work that has to come back into play to sustain offshore infrastructure safety and production capacity. The application of optimised, cost effective solutions and technologies is the obvious answer to unlocking this potential revenue.
What's the future for oilfield services?
The current expectation across the sector is for a recovery starting between 2017 and 2018. The recent OPEC agreement to cut production has provided a fair wind for a market recovery, however, we will need to see this turn of sentiment endure to provide the solid base required. Any market recovery will initially be a slow drip feed of project FIDs resulting in a controlled uptick in activity while keeping prices as competitive as possible. Operators will need to build on their recent control of supply chain costs while managing the green-lighting of new Capex projects and limiting cyclical price increases. Given the recent supply chain capacity reduction and levels of duress, we believe this to be a sizeable challenge.
A time for bold decisions?
We see the door starting to open for further M&A and consolidation opportunities. It's a great entry point for those trade players with resilient balance sheets or private equity and special situation funds. They can take advantage of the rebasing of costs ahead of a recovery in the market. So the green shoots of optimism are beginning to appear, though it's not for the faint hearted as an appetite for risk is required to gain a first mover advantage. Deal timing is everything: wait too long and the market will be flooded with investment pushing up prices; go in too early and additional losses will materialise.
Be ready for the opportunities
The window of investment opportunity has started to creak open and will remain open to the risk-savvy sector specialist able to identify a solid, well-priced solution or service over the next year. Beyond this, opportunities will diminish as investment floods the sector and drives sell-side price expectations well above where they should be.