The Oilfield Services or Equipment Industry consists of a mature set of companies associated with exploration and production processes of oil and gas (for instance, the upstream sector of the energy sector). They are involved in the repair, maintenance, and manufacturing of equipment utilized in extraction and transportation of oil.
Generally, seismic testing, directional services for horizontal drillers, transport services, and manufacturing and completion services are what usually come to mind when we talk about oilfield and gas field services companies.
However, the range of products or services provided by oilfield service companies is wide and consists of technology-based assistance that are crucial for the success of any field operations. Some of these services are energy data management, geological sciences, locating energy resources, and drilling and formation evaluation.
Innovations in technology have helped various companies become more efficient, especially in resource extraction and management. They have capitalized on technology-based solutions to meet the growing demand in the subsector.
How do oilfield service companies fit in the industry?
Modern OFS providers emerge through different factors dating back to the collapse of oil price in the 90’s and the mergers of Exxon-Mobil and BP Amoco. Mega-mergers allowed collaboration of logistics, as well as restructuring and optimization of assets.
While their benefits were clear in the downstream segment, their effect on the upstream side was not very noticeable. Actually, the ownership of these wide range of solutions developed unnecessary expenses and inefficiencies that made it costly to provide required upstream aid without affecting the bottom line.
These segment trimmings have enabled the evolution of a specialized oilfield service or equipment industry, which gives the majority of the innovation and technology needed across the processes of oil and gas production.
Key Indicators Of The Oilfield Services Sector
To gauge the outlook and demand across the industry, certain indicators are used by oil and gas field services companies. Here’s the non-exclusive list of these factors:
- Rig and Well Counts
The active rotary rig count is one of the most closely followed indicators of the level of demand for the oilfield services industry. It has been considered as a business measure for the drilling industry, as well as its suppliers.
Well counts, on the other hand, have become the primary indicator of profits. They helped improve predictive power than indications only provided by active rotary rig counts.
- Equipment Orders
For any manufacturing business, a consistent flow of new orders is vital for success, and it’s no different with the oilfield services sector. It is necessary for them to announce major orders, and these announcements offer useful data about the level of demand across various aspects of the service lifecycle.
- E&P Capital Expenditure Budgets
The size of capital expenditure budgets will help determine how the sector will perform as a whole. It is the leading indicator of future demand.
OFS companies announce backlogs as an image of their business’s health. It provides an indication of the value of revenue that is not yet recognized, as well as the demand for services to be offered in the future.