Demand for the expertise of well services contractors operating in UK waters remained steady according to figures in the Oil & Gas UK Well Services Contractors Report published today, June 3, 2015, which looks back at how the sector fared in 2014.
Well services companies are involved in a broad spectrum of activities including the design, manufacture and sale of drilling and completion equipment and the services related to the installation and operation of this equipment on the UK Continental Shelf (UKCS).
The information contained in the 2015 report represents around 85 per cent of well services contractors. The data for this report were collected in March 2015 and the companies surveyed include: Baker Hughes, Archer (UK), Schlumberger Oilfield Services, Halliburton, Altus International and many more.
Gross revenue & EBITDA
According to Oil & Gas UK, these companies, which support the UK offshore oil and gas industry throughout the life cycle of well operations, reported gross revenue of $3.24 billion (£1.97 billion) in 2014 which is a small increase of one per cent on the 2013 figure.
Although this represents a small increase, Oil & Gas UK says that the survey respondents forecast a decrease in revenue of nearly 23 per cent in 2015, reflecting the predicted downturn in drilling activity resulting from the reduction in oil price.
In 2014, the earnings before interest, tax, depreciation and amortisation (EBITDA) was $591 million (£359 million), an increase of nearly 23 per cent on the 2013 figure of $482 million (£308.5 million). This is 14 per cent higher than the $520 million forecast and is largely due to strong performance in the first three quarters of 2014.
Lowest investment levels since 2010
According to the report, the UK well services contractor sector reported capital investment of $148.7 million (£90.3 million) in 2014, a 30 per cent decrease on the 2013 figure of $212.5 million (£136 million).
This is the lowest level of capital investment by the sector since 2010. It is forecast to fall a further 25 per cent to $110.8 million in 2015.
Spend on new technology in 2014 was $49 million (£30 million), 14 per cent less than $57 million (£37 million) in the previous year.
Oonagh Werngren, Oil & Gas UK’s operations director, said: “Throughout the first half of 2014, it was clear that well services contractors continued to benefit from the high level of investment in the UK continental shelf (UKCS) which occurred in 2013.
“In the latter half of 2014, however, a number of companies reported a slow-down in the demand for their services and expect this trend to continue in 2015, with respondents predicting that the oil price fall will have a negative impact on drilling activity.”
The report confirms that along with the rest of the UK oil and gas industry, well services contractors face a challenging business environment and therefore recruited fewer staff during 2014. The sector employed 12,894 people, which is a decrease from 15,339 in 2013 and is predicted to fall further in 2015.
However, according to Oil & Gas UK, the sector highlighted its intention to encourage broader commitment to shared industry tools including standard contracts which would contribute to the industry’s cost and efficiency efforts and help both operators and supply chain companies become more competitive.
Image source: Baker Hughes