Spending on offshore oil and gas exploration and production activities in 2019 will outpace onshore spending, and companies exposed to offshore subsea and maintenance modifications and operations, or MMO, will benefit the most, Rystad Energy said in a Jan. 16 report.
At current oil price levels, 2019 spending on land rigs, fracking and other services for the shale industry is likely to stay essentially flat to then fourth quarter 2018, when crude oil prices dropped and the number of fracked wells per day fell from an average of around 50 wells to 44 wells.
"We expect to see a total of around 20,000 wells completed in North America this year, more or less on par with the tally for 2018, but we do not anticipate seeing utilization returning to the levels seen in early 2018," Rystad head of oilfield services research Audun Martinsen said.
However the offshore service market, although still feeling the effects of the recent oil price slide, is projected to grow by a robust 4% this year, according to Rystad.
Offshore spending will be driven by exploration and greenfield projects, while operational expenditure budgets will likely swell due to cost inflation, more fields coming on stream and a buildup of work that needs to be completed."Many would expect offshore spending to be cut as drastically as shale, but offshore budgets were at a 10-year low last year, after four years of intense cost focus, and from that level you don't need much additional activity or inflation to drive up the market," Martinsen said.
As long as Brent crude oil is priced below $60 a barrel investors should look at service contractors exposed to the offshore sector, particularly the offshore subsea market and MMO, where the best revenue growth is expected, Rystad said.
A Brent crude oil price of $64/bbl would drive 5% growth for both shale and offshore activities, while at $70/bbl shale industry growth of 14% would outpace offshore growth.