Following a downturn that began in 2014 when crude oil prices crumbled, a recovery in the global oilfield service sector could take 11 years, likely occurring in 2025, according to Norwegian research and consulting firm Rystad Energy.
"This will be the longest slump faced by the oilfield service industry since the 1980s, with about $2.3 trillion in revenues lost along the way," Audun Martinsen, Rystad's head of oilfield service research, wrote in a March 19 report.
In 2014, oil service companies were hit hard by the oil price collapse, resulting in a lengthy downturn for the sector. While many of these companies have already begun experiencing a rebound, Martinsen said the ongoing recovery will take place at different time periods across the sector's various segments.
The leasing sector for Floating Production Storage and Offloading vessels has seen the quickest recovery, and is expected to fully recover to its prior peak by 2020. By comparison, Martinsen said the North American pressure pumping industry should only return to 100% of its previous peak in 2023, and the offshore drillers and seismic contractors are not expected to see full recovery until 2027.
"As for the offshore market, we expect recovery to be slower than for onshore and North American services. The offshore market bottomed out in 2018, and it will take some time to turn around fully, as capital investments are ramping up slowly and some cost efficiencies have yet to be realized," Martinsen said.
"Offshore drillers and seismic contractors are the last segments expected to return to their former glory, as recovery is slowed by ... multiple factors — a supply overhang, higher drilling efficiency, low utilization and scant interest in exploration," Martinsen said.