Abu Dhabi: Oilfield services firms are expected to perform better this year due to recovery in oil prices and increase in tendering activity, top executives and analysts told Gulf News pointing out there will still be some challenges for the firms due to reduced profit margins.
Oilfield services sector has been badly hit in the past few years following the collapse in oil prices and sharp pull back in capex in oil and gas sector. Thousands of people lost jobs and billions of dollars have been wiped out from the market.
“Year 2018 should be bit of a turning point. Rising oil prices and firming sentiment will drive up spending and that should lead to stronger tendering activity, higher fleet utilisation and rising charter rates and revenues for oilfield services providers,” said Emma Richards, senior oil and gas analyst from BMI Research.
From more than $100 (Dh367) per barrel in 2014, oil prices plunged to less than $40 per barrel in 2016 before recovering in the last one year to trade above $50 per barrel due to production cuts by Opec (Organisation of the Petroleum Exporting Countries) to boost oil prices.
Richards, however pointed out there will still be a very strong focus on keeping down capital and operating costs, which will continue to pressure margins for oilfield services companies.
“We do see spending rise next year, but the growth isn’t overly aggressive — around 4 per cent globally and a bit shy of that in the GCC.”
“The companies that will outperform will be the ones that can provide upstream producers with continuing efficiency and productivity gains. Conventional onshore will continue to be the main focus, although opportunities will arise in the offshore and to a lesser extent unconventional spaces too.”
Dubai-based Topaz Energy and Marine, which supports the industry with offshore vessels expects more opportunities this year compared to previous years.
“The market will continue its slow recovery in 2018 as oil prices stabilise and production increases. As a result we have reactivated three laid up vessels to the Mena (Middle East and North Africa) fleet and redeployed one vessel from Africa. We are leveraging our strong presence in the region to continue to pursue and win contracts,” said Rene Kofod-Olsen, CEO of Topaz Energy and Marine, a subsidiary of Renaissance Services, a publicly traded company on the Muscat Securities Market.
The firm has a fleet of 100 offshore support vessels with operations in Caspian, Middle East, West Africa, North Sea and Gulf of Mexico.
“After re-financing this year and having secured significant contracts with Dragon Oil and Total, I believe we are in a good position for 2018 and on our way to capture more of the energy logistics market as we look to expand and diversify our offering,” added Kofod-Olsen.
Ebrahim Al Alawi, Deputy CEO of Abu Dhabi-based AlMansoori Specialized Engineering also expects 2018 to be a better year for the industry.
“As we have become accustomed to lower prices for our services, we have incorporated new ways of working into our everyday business practices to optimise costs. We are confident that we will survive this downturn and come out stronger when things pick up.”
The company remains focused on the UAE, Saudi and Kuwait while also expanding their presence in other regional markets such as India, the CIS (Commonwealth of Independent States) countries and East Africa.