The oilfield services sector is likely to remain resilient in 2025 amid an improvement in business activity over the past three years, according to Deloitte’s 2025 Oil and Gas Industry Outlook.
In the last decade, the oilfield services sector had lagged behind the rest of the oil and gas industry as efficiency and productivity gains in the shale market reduced the business and margins, Deloitte said in the report.
“Simply put, the sector became a victim of its technological success for its customers, reporting US$155 billion in losses between 2015 and 2021,” the services network company said.
However, according to the report, there are visible signs of a turnaround for the sector.
Net income has cumulatively exceeded $50 billion
Over the last three years, the sector’s net income has cumulatively exceeded $50 billion, Deloitte said.
Currently, its capex is at the highest level, while net debt is at one of its lowest points since 2016, according to the report.
Meanwhile, the oilfield services mergers and acquisitions (M&A) deal-making within the first nine months of 2024 reached $19.7 billion, the highest since 2018.
Deloitte said:
In fact, oilfield services companies seem to be repeating what their upstream shale customers did years ago—growing profitably without a commensurate increase in capex.
Innovation and cost-reduction measures
According to the report, the oilfield services sector’s transformation over the last few years can be attributed to a strategic blend of innovation and cost-reduction measures.
Oilfield companies have been using their digital capabilities to deliver high-margin, lower-carbon solutions to their customers.
“For example, SLB is developing an all-electric subsea infrastructure aimed at reducing costs, improving efficiency, and lowering carbon emissions,” the agency said.
These companies have also been working on several cost-reduction measures such as restructuring operations, exiting nonprofitable business lines, implementing variable cost management programs, and streamlining corporate structures.
By recalibrating its strategies, the sector has navigated the challenges posed by reduced demand for certain services, while continuing to drive efficiency and maintain capital discipline.
Leveraging M&A offshoots
“A period of financial strength amid an easing macroeconomic environment and a highly fragmented sector is generally followed by consolidation,” Deloitte said.
SLB’s acquisition of Champion X in an all-stock transaction valued at $7.8 billion focused on expanding production and recovery space that covers the asset life cycle from completion through decommissioning, according to the report.
Similar considerations were also involved in Nabors Industries Ltd’s acquisition of Parker Wellborne.
“Considering their large upstream customers have completed megamergers in the Permian region in 2023 and 2024 and will require scalable and tech-powered oilfield services, many small-sized companies could seek exits at favorable valuations, spurring consolidation across the sector,” Deloitte said.
Buyer interest for drilling rigs increased in 2024 with deal value reaching $3.8 billion, its second-highest since 2018.
The post Oilfield services sector set to stay resilient in 2025 as business activity grows: Deloitte appeared first on Invezz