Oil & Gas Support Services
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 8,700 oil and gas service companies provide a variety of support activities to oil and gas operations on a contract or fee basis. Services support the exploration, drilling, testing, and clean-up operations for on-shore or off-shore oil and gas wells.
Dependence On Petroleum Demand
During periods of slow or negative economic growth, demand for petroleum products falls, resulting in fewer capital projects by the oil and gas industry.
New Environmental Regulations
Adoption of any future federal or state laws limiting use of specific technologies and services, such as hydraulic fracturing, vapor extraction processes (VPX), and cyclic steam stimulation (CSS) could make it more difficult and expensive to obtain petroleum products from unconventional sources.
Industry size & Structure
A typical oil and gas services company has fewer than 20 employees and annual revenues of $7-8 million.
- About 8,700 firms employ 202,300 workers and generate $68 billion in annual revenue by providing support activities for oil and gas operations in the US.
- About 82% of firms employ fewer than 20 workers and together account for 11% of industry revenues. Almost 5% of firms have more than 100 employees and earn 64% of industry revenues.
- Large service firms include Halliburton Company, Schlumberger Ltd, Weatherford International and Baker Hughes.
Industry Forecast
Oil & Gas Support Services Industry Growth
Coronavirus Update
May 20, 2022 - Drilling Leases Canceled
- Future demand for oil and gas services off Alaska and in the Gulf of Mexico is threatened by the Biden Administration cancellation of plans to auction drilling rights in those areas. The decision to cancel the lease sales, scheduled for later this year, leaves oil-and-gas companies facing a blackout period of unknown length for access to new drilling spots in valuable offshore acreage, The Wall Street Journal reported in May. A five-year schedule for offshore lease sales expires at the end of June, and the Interior Department hasn’t yet proposed a new one. Canceling the pending sales with no new schedule could mean the industry now faces years between successful federal offshore auctions, according to the Journal.
- Institutional investors who fled the oil and gas sector citing climate change and poor returns are giving energy a second look, according to The Wall Street Journal. Recent strong performance of energy stocks – the S&P 500 Energy Sector Index is up 40% to date in 2022 – and projections of a coming global energy crunch are luring some pension funds, endowments and other institutional investors back to fossil fuel producers and the broader energy sector. New money could boost production and benefit oil and gas support services, but is likely to be modest as colleges and public pension funds are likely to continue to avoid the sector, the Journal reports.
- Capital spending by North American oil and gas producers, a driver of demand for oil and gas support services, is likely to rise by more than a third in 2022, Halliburton CEO Jeff Miller told investors in April. Miller characterized the North American oil and natural gas equipment market as “almost sold out,” enabling Halliburton to hike prices, he said. Triple-digit oil prices and strong consumer demand are driving producers to boost short-term cycle projects amid rising inflationary costs.
- Under public pressure to reduce emissions, large oil companies are investing in carbon capture and storage (CCS). In an April 2022 presentation, Exxon Mobil estimated the market for capturing carbon dioxide and storing it underground to reach $4 trillion by 2050. An important emissions reduction technology, carbon capture involves collecting carbon dioxide from fuel combustion or industrial processes, transporting it via ship or pipeline, and storing it underground in geological formation or as a resource to create products. Given its size, the CCS market represents a lucrative opportunity for oil support services firms.
- The break-even price for the average oil well drilled in shale fields is roughly $45 a barrel. Given the high price of oil, producers are incentivized to ramp up drilling and production, which benefits oil and gas support services. On May 13, 2022, 714 rotary rigs were producing oil and gas, up from 705 the previous week and 453 a year ago, according to Baker Hughes.
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