The latest update to the World Oilfield Equipment Market Forecast shows little movement in global spending expectations over the next 5 years. Thus far, 2017 has seen a strengthening onshore rig count, led by US activity, but firms within the offshore sector have seen little abatement to the challenges presented over recent years.
The contrast between the equipment and service sectors is very evident. Westwood's recent Drilling & Well Services market forecast showed a sharper decline since the downturn but with a stronger growth outlook to 2021. The Oilfield Equipment sector, on the other hand, has been better-supported by backlogs since 2014 but faces a period of suppressed activity in the near-term.
Global Oilfield Equipment and Drilling & Well Services Expenditure Indices (base year: 2014)
Key Conclusions:
-Global expenditure to increase at 0.7% CAGR over the forecast – down from 1.1% last quarter.
-Offshore expenditure will total $244bn over 2017-2021 – $9.5bn lower than the previous forecast.
-Rising onshore expenditure (US driven) will be offset by declining offshore spend.
-Pricing pressures in the US onshore basins have cooled somewhat, though activity remains strong.
-E&P related spend to account for 75% of global forecast total, up from 70% over 2012-2016.
The World Oilfield Equipment Market Forecast Q3 2017 shows total global expenditure growing at an expected CAGR of 0.7% through to 2021, compared to 1.1% in Q2's release. This is the result of cooling in US onshore activity and downward adjustments to forecast MODU ordering activity. Whilst global equipment expenditure has undoubtedly been boosted by the recovery in the US oil patch, prospects for the wider equipment manufacturing community will remain troubled until the upturn spreads to high-cost offshore project sanctioning on a wider scale . This is in contrast to the Drilling & Well Services sector, which bore the brunt of Capex reductions in 2015-2016, but is now expected to see strong growth.
Westwood's onshore oilfield equipment outlook shows a 5% CAGR for global expenditure, with all regions seeing positive average growth rates over 2017-2021 – with the exception of Asia (-0.5% CAGR). The vast majority of the growth in onshore expenditure will come from North America, which will see an 8.4% CAGR over the forecast (8.2% last quarter). US rig count growth has slowed in the last quarter while the divergence between WTI and Brent crude prices have widened.
In the offshore space, Westwood expects a -4.7% CAGR, marginally worse than the -4.6% expected last quarter. This is due to delays to expected project sanctioning in recent months, in addition to a continued worsening of the long-term MODU construction outlook, the Capex of which is phased from order to delivery
The World Oilfield Equipment Market Forecast offers unique insight into over 60 different equipment types across upstream and midstream and is an essential product for business planners and those looking to make informed investment decisions. Drawing from Westwood's cutting edge SECTORS product and a wide-range of other internal databases (including land rigs, pipelines, helicopters and upstream infrastructure), the World Oilfield Equipment Market Forecast also takes account of the latest macro-economic trends through daily updated databases and explicit commodity price, global inflation and supply chain pressure inputs.
Source: Douglas-Westwood