Oil well contractors forecast dismal 2015, with N. Sea jobs, revenue, investment and profits set to fall

Oonagh Werngren, Oil and Gas UK
Oonagh Werngren, Oil and Gas UK

Demand for well services contractors operating in the North Sea remained steady last year according to latest figures issued by Oil and Gas UK – but is expected to drop in 2015 as the slump in crude oil prices feeds through the supply-chain.

The sector also cut jobs – with graduate engineering posts being hit particularly hard – and employment is predicted to fall further in 2015.

Gross revenue for the sector was $3.24 billion in 2014. Although this represents a small increase (1%) on the 2013 figure, the survey forecast a decrease in revenue of nearly 23% for 2015, reflecting the predicted downturn in drilling activity resulting from the reduction in oil price.

Capital investment at $148.7 million decreased by 30% in 2014 and is the lowest level by the sector since 2010. This too is forecast to fall a further 25% to $110.8 million in 2015. Spend on new technology decreased by 14% to $49 million.

All survey respondents reported a decrease in demand for their work in 2014, particularly in Q4, and the level of optimism within the sector has decreased, with companies predicting lower activity levels in 2015.The information contained in the 2015 report represents around 85% of all well services contractors and included: –

  • Altus International
  • Archer (UK) Ltd
  • Baker Hughes
  • Frank’s International
  • Halliburton
  • Read Cased Hole, and
  • Schlumberger Oilfield Services

In 2014, the UK well services contractor sector employed 12,894 people. Although this represents a 16% decrease on the 2013 figure of 15,339, a comparison of like-for-like information shows a smaller 3% decrease. This discrepancy is due to different companies submitting resource information for this report.

In 2014, the number of graduate engineers (326), technicians (1,189) and apprentices (89) employed within the sector declined by 75%, 36% and 64% respectively.

A large proportion of these decreases is due to different companies submitting information to this year’s survey. A like-for-like comparison shows that the number of graduate engineers decreased by 44%, the number of technicians by 3% and the number of apprentices by 47%

 However, further reductions are forecast in all three areas in 2015.

Paul White, Chairman, Oil & Gas UK Well Services Contractors Forum, commented: “In common with other sectors in the oil and gas industry, well services contractors recognise the importance of tackling cost and improving efficiency and they continue to invest in technology and processes to support these goals.

“Such improvements in efficiency contribute to promoting increased activity and help maximise economic recovery from the UKCS.

“Survey respondents highlighted a desire to focus on standardising processes to help improve efficiency through the use of shared industry tools such as standard contracts. These documents, alongside other tools and processes have been developed to help both operators and the supply chain become more cost effective.

“Further and continued collaborative effort can help to deliver value to all stakeholders and is strongly welcomed and encouraged by both Oil & Gas UK and the Well Services Contractors Forum.

Oonagh Werngren, Oil & Gas UKs 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.”

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