I work for an onshore operator, and have little understanding of the state of the business for offshore companies.

I am curious: will companies that typically made their money offshore begin to look for onshore opportunities?

kornut11 said:

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I work for an onshore operator, and have little understanding of the state of the business for offshore companies.

I am curious: will companies that typically made their money offshore begin to look for onshore opportunities?

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Remember Im ONLY talking about manufacturers. The world is pretty full of companies developing and manufacturing on shore equipment. Its not near as complicated and highly engineered as the gear that must operate in the harassing environment on the planet miles and miles below the surface. There is not a huge barrier to entry for onshore guys and there is already many many cheap foreign types building a ton of the basic gear used on land.
I think it is a losing battle for a manufacturer of offshore gear to try and capture any significant land market that they dont already have.

You start doubting life choices all the way back to your major at A&M. Sucks.

nu awlins ag said:

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Found this an interesting read.

Quote:

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http://oilpro.com/post/30230/beginning-end-bakken-shale-play

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That was a great article. Had a few retrofit/green field construction jobs related to the Bakken. As all these millions are spent in capital development of these shale plays, I wonder how they align with what they expected the depreciation schedule/payback timeline would be.

kornut11 said:

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I work for an onshore operator, and have little understanding of the state of the business for offshore companies.

I am curious: will companies that typically made their money offshore begin to look for onshore opportunities?

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There's an entire offshore eco system so this isn't a yes/no answer.

The majors obviously have a footprint in both places.

But for manufacturers and service providers it's not something that really translates.

My experience is with offshore contractors. Those guys can't move onshore - everything that they have and are invested in is relative to engineering, procuring, and installing offshore.

Right now there is a huge glut of expensive purpose built installation vessels that have a very high operating cost whether working or not.

Until there is both a recovery in demand AND a reduction in the supply of these specialized vessels, recovery for offshore contractors is in the distant future.

You would think EMAS going out of business would help on the supply side - and it will some - but then Subsea7 comes along and takes possession of the Lewek Constellation which keeps capacity in the market that isn't needed (clearly or EMAS probably wouldn't be bankrupt).

McDermott did the same thing with the Ceona Amazon.

In both situations, the overall market would be better off if the banks owned those vessels and they ended up being scrapped/sunk etc.

I thought so too. It does go to show that not all the fields are like the old stand by in West Texas. While we may have a good supply today, if the money is not spent or gathered today, tomorrow could be very interesting. Looking at the IEA report, they are saying they expect shale production to grow by 1.4 million barrels per day by 2022 with prices at $60 per barrel and 3.0 million if prices jump to $80. China down graded their growth from 6.7 percent to 6.5 percent. They are trying to tighten their regulatory controls in a effort to curb pollution. That's great and all, but their population is not getting smaller as is India's. Not sure how much faith I have in the IEA any more. If OPEC cuts even more, as they are currently discussing, the dynamics will yet change again. This is a professional game of "pin the tail on the donkey" right now in terms of what happens next, in my opinion.

OP, is this you?

https://www.wsj.com/articles/brought-down-by-long-bust-texas-oil-men-pray-for-another-boom-1488739082

Nope. I know them ( slightly) but it ain't me.
Even "bankrupt" they are still prolly worth more than most of this august group combined.
Kristi does a lot of great work with K-9's and LEO's.
They are good people and strong Aggies.

here's a different bakken view:

https://rbnenergy.com/what-a-difference-a-dapl-makes-how-the-new-crude-pipeline-may-spur-bakken-gains

That has been the issue for some time. They still move most by rail, but this will help with that, no doubt. The article I posted was more about actual field performance of the wells and the decline curve analysis etc. Who knows, maybe higher prices will attract more players there.

Clearly the guy that wrote the article you posted has not been listening to all of the wall street gurus that say "shale is now profitable at $35 and the oil companies will be increasing production with new technology and prices will be low for the foreseeable future."

Did anyone see Exxon is shifting half of their entire upstream budget to US Shale plays over the next 3 years?

https://www.bloomberg.com/gadfly/articles/2017-03-02/exxon-analyst-meeting-remaking-shale-or-vice-versa

Quote:

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Exxon plans to devote about a third of this year's upstream budget to shale, rising to about half in the following three years. This is a very big deal. Spending this year alone will amount to $5.5 billion and will rise from there. Consider that EOG Resources Inc., one of the biggest E&P companies producing shale oil, laid out plans this week to spend up to $4.1 billion in 2017. Exxon, for long a global rover, has come home.

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Not half, but compared to the offshore market it was a no brainer. Faster results and a lot less to produce it.

To continue my thoughts on how bad offshore is right now, see below from HESS CEO:

Hess: Deepwater at rock bottom, but there are exceptions

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Speaking at the Ceraweek panel in U.S. Hess said while the spotlight has been on shale, most people don't realize that offshore deepwater makes up about seven percent of world oil supply, while shale is five percent.

"While shale was the first to go down (during the oil price crash), offshore deepwater has been the last to go down, and is really at rock bottom."

Commenting further on the current conditions in the offshore market, Hess said the offshore rig utilization is now at about 50 percent, meaning there's a lot of equipment lying around that cannot be used.

"Offshore drilling rates, whether it's for a drillship or semi-submersible have gone from $600.000 a day in the heyday to $200.000 per day today barely covering operating expenses.

Also he said that oil and gas exploration investments globally have shrunk from $100 billion to $40 billion this year.

Hess also highlighted the $40 billion number has been like that for two years.

"So, in sum, we're not spending enough money, we're not investing enough, to keep offshore development pipeline full."

Hess said the consequences of this under-investment will start to show in a few years, echoing a statement by IEA made earlier during the day when it said that oil prices might jump after 2020 if no new projects are sanctioned soon.

John Hess then went on to quote the IEA who said that the industry needs to spend in excess of $600 billion a year to hold global oil and gas production flat. According to Hess, in 2016 the investments were at around $300 billion, while 2017 should be around $410 billion.

So, he said, as an industry we're not investing enough to ensure that we have enough supply growth to keep up with the demand growth and offset the annual decline in production.

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Welcome to our hell.

It will be interesting over the next couple of years. Offshore has always accounted for a large portion of the backlog proven reserves that represents a lot of the value of the big boys. It won't happen over night or even over a couple of years, but eventually there won't be near as much reserves to bolster the stock price as they churn and burn shale.

Why the kick in the nuts today on oil?

Inventories rose for a 9th straight week. The same outfit that said there could be a shortage in a few years is the same one touting too much oil right now. They need a kick in the nuts if you ask me.

Oil prices perplex me. We're still trading at over $50, and inventories continue to rise. It seems like oil is way over priced. At some point this has to come back down to $40 right?

1876er said:

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Oil prices perplex me. We're still trading at over $50, and inventories continue to rise. It seems like oil is way over priced. At some point this has to come back down to $40 right?

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Summer looming. Time to buy a couple of F250s.

https://www.bloomberg.com/news/articles/2017-03-07/pioneer-s-sheffield-sees-40-oil-if-opec-doesn-t-extend-cuts?cmpid=yhoo.headline&yptr=yahoo

Opec will have to make larger cuts because the US is just dumping oil on the market right now. A lot of it is from storage and not necessarily new well production although the rig counts have been growing but 10 or so rigs a week is not going to add that much to production.

What I would like to see, which I haven't seen published yet, is the daily world consumption vs. production. Last numbers I saw were something around 93-94 million barrels a day. Not sure where that number is today. Any hangover I suspect will get eating up this summer as prices start to fall, which should bode well for price bounce backs in the late 3rd quarter. I still see price hitting around $60 by years end. Shell is moving forward with their first GOM project in 18 months or so, so there is that.

Looks like the Permian and Delaware are going to drive prices back down, unfortunately. These aggressive drilling programs are going to put peak production into a crappy oil market, but I am sure they are mostly hedged at $50-$55 when they get these wells on (doubt the operators can speculatively hedge).

I am not optimistic about any business plan that involves drilling in more than 6,000 ft of water in the foreseeable future. And I have this thought that even that is based more on hope than anything else.

Why's that?

The Original AG 76 said:

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Vernada said:

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GigemCO2008 said:

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Offshore is still pretty bloody, day rates now are going for around 225 for 6th gen, if they can get work.

I'm now on hot stacked rig, and I can see 5 drill ships in our vicinity 15 miles off Port Fouchron

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Yes, offshore is no where near recovery - it's not even certain that the bottom has been found yet.

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Watching the backlogs drop in the offshore manufacturing side is amazing. On a percent side this is worse than the 80's and there is just no end in sight. Nothing on the horizon in even REMOTELY in sight to help the deepwater side. As long as the land side is so damn cheap and easy and EFFICIENT there really is just no reason for the deepwater side to even remotely recover for years.
The carnage is really just beginning for many manufacturers. 17 will be a rough rough year.

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Deepwater is dead for the foreseeable future .... Too much risk, high cost, and time to develop. Why invest in deepwater when you can go to a shale play and get your return on investment quickly and not put up with government rules. Unfortunately you will not be able to drill any cheaper than you can now as far as offshore. If you have the money now is the time to drill exploration wells. Who knows what the price will be when you are able to get a discovery developed and on production, but companies don't operate that way. Besides most exploration plays are dry holes. Drill cheap dry holes is the name of the game in exploration drilling.

Glad I am in retired mode in this business. This downturn will last for a little longer with some ups in places, but the offshore enviornment is going to see more pain until the price gets in the $70 region. I know my business was mainly in SE Asia and it ain't coming back there until prices are sustainable in the 70's. The world economies will have to turn up and demand for oil with it before we see a price recovery that is sustainable.

Agree on Offshore. Tough investment criteria when considering alternatives. I would get out of that side of the business on the EPC side asap.

FTAco07 said:

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Texas A&M made the front page of the online WSJ.

https://www.wsj.com/articles/brought-down-by-long-bust-texas-oil-men-pray-for-another-boom-1488739082?tesla=y

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Saw similar stories in the 80's downturn. One more boom and I will not screw it up this time .... yea right, but many will as they do not learn and let greed or denial take over rational thinking. Many that got left in the dust in the 80's now are reliving history again and the ones that were not around in the 80's are learning the hard way from this bust. Just remember what you learned.

Shale Rebound
Undercutting OPEC

"Can it last? The answer, as usual, will depend on the pesky supply-demand puzzle. The metric Galitzine is keeping his eye on is how much the shale drillers are erasing crude cutbacks from Russia and the 13-member Organization of Petroleum Exporting Countries, which agreed in November to trim output by 1.2 million barrels a day.

"For every barrel that OPEC cuts, the American shale drillers are putting on half a barrel. If that remains, then I think we're okay." If shale fields start churning out much more, "then who knows what's going to happen to the price of oil," he said. "Probably nothing good.""

"While American producers seem unlikely to agree to any broad output curb with OPEC, they are keenly aware of the supply and demand for oil.

"We have the potential to oversupply the market," said Continental's Hamm. "And we have a great responsibility not to do so.""

"The unexpected supply surge pushed U.S. oil prices down more than 5 percent on Wednesday to close at $50.49.

The price drop underscored the growing impact of U.S. shale production on global supplies and prices relative to OPEC member nations, which once exercised dominant influence on global markets. Representatives from both sectors acknowledged that power shift at the energy conference in Houston."


US shale is now positioned to control global oil prices--talk about an energy revolution!

Let's just hope they push for higher prices instead of just producing thus decreasing prices. Read an article from CNBC where this one cat is predicting a fall back down to $42. Let's hope not for those still in the race..

Exxon has to do something to counter Saudi's IPO.

I think at this point, BP leadership might welcome it.

BP plays a lot more in Subsea than Exxon though. Maybe they keep all inshore and spin off subsea. Who knows.

Charlie Murphy said:

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Ahh BP rumors, that time of year again?

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I'm surprised the Shell buying BP rumor hasn't started up again, although I guess since they bought BG they wouldn't have the cash

Exxon, Shell, Total then repeat next year.