Oilfield Services Facing Years Of Decline

Thursday, April 2, 2015
By Paul Martin

By Charles Kennedy
OilPrice.com
Thu, 02 April 2015

Oil field services companies are in for a rough year.

The firms that provide the critical services for oil drilling are often not the ones that make headlines. But they are on the front lines making sure everything runs smoothly. That includes everything from drill equipment, to rigs, lodging, well completions, frac sand, transportation, and more.

Much has been made about the pain that oil production companies are going through. The oil majors like ExxonMobil and Royal Dutch Shell have made massive cuts to their capital spending as a result of low oil prices. But once oil prices rebound, their revenues will rise in concert with the price of WTI and Brent.

However, for the services firms, relief may not arrive this year – even if oil prices rise. That is because their balance sheets rise and fall with drilling activity, rather than the price of oil (although they are strongly correlated). With huge holes to plug in corporate balance sheets, drilling activity will not pick up right away even if oil prices rise. Oil executives will likely remain cautious, and take a more conservative approach to spending and drilling.

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