In the realm of oil and gas, the Big 3 oilfield services (OFS) giants – Baker Hughes, Halliburton, and Schlumberger – are reveling in soaring profits. Their combined Q2 adjusted profit is set to reach an impressive $2.04 billion, surpassing last year’s $1.27 billion.
The driving force behind this success lies in the robust demand for their services, coupled with a surge in offshore oil and gas drilling activities. Notably, the international market, particularly the Middle-East and Latin America, is leading the way, thanks to a concerted effort to bolster oil and gas production capacity.
Analysts from BofA and TD Cowen acknowledge the strong visibility of multi-year volume growth and orders for OFS companies with international and equipment exposure.
Norwegian energy intelligence firm, Rystad Energy, forecasts an astounding 35% surge in offshore oil production during the current decade. By the turn of the decade, offshore production is expected to reach an impressive 3.3 billion barrels per year, significantly surpassing the 2.5 billion barrels recorded in 2021.
Brazil stands out with surging offshore production, positively impacting the utilization of shuttle tankers, which have witnessed a remarkable 55% increase in activity from 695 million barrels in 2013 to 1.07 billion barrels in 2021. Rystad Energy predicts an additional 72% increase in activity by the end of 2030, with total volumes handled by shuttle tankers expected to hit 1.84 billion barrels.
The surge in demand necessitates an influx of new shuttle tankers to cater to growing needs and replace aging capacities. With the offshore industry’s robust economics and competitiveness, new investments in offshore production are expected to continue, ensuring a bright future for the shuttle tanker industry, according to Oddmund Føre, senior vice president of energy service research at Rystad Energy.
In light of this promising outlook, OFS stocks are experiencing a remarkable upswing. The VanEck Oil Services ETF (OIH), a popular benchmark for the sector, has achieved an impressive 14.3% return year-to-date, in stark contrast to the -3.7% return of the energy sector’s Energy Select Sector SPDR Fund (XLE). Exciting times lie ahead for the oilfield service providers, as they capitalize on the surging demand and flourishing market opportunities.
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