Oil production from mature oilfields is dropping faster than the global demand for oil is rising, 2%-6% versus 1%-2%, respectively, according to The Economist. And while new technology aids in the production of oil as crude get harder to find and harder to extract, it is the oilfield services companies (OFS) that benefit more than the oil exploration and production companies, noted Saurage Marketing Research in its Energy Key Findings: November 2012 report.
Companies like Schlumberger(NYSE:SLB) and Cameron (NYSE:CAM)—who just signed a joint venture agreement in the subsea services space—and others like FMC (NYSE:FTI), Halliburton, Baker Hughes, Transocean and Weatherford are sometimes called “the unsung workhorses of the industry,” said the report, yet, many “continue to rival or surpass those of the major oil companies who hire them. According to McKinsey, OFS companies grossed around $750 billion last year.”
According to The Economist, Schlumberger earned $5 billion in profits on revenues of $40 billion last year while increasing its market capitalization fourfold in the past decade. Schlumberger’s $91 billion market cap is larger than a number of the so-called “supermajors”, including ENI ($82 billion), Statoil ($75 billion) and Conoco-Philips ($71 billion).
And, while North America has experienced a “game-changer” in the form of the unconventional resources boom, oilfield service companies are actually faring better in the global market. In October, IHS reported that the major oilfield service companies saw their mid-year margins in North America shrink in 2012, while their costs rose, but said margins from activity occurring outside the US are growing for companies in this sector, and rig counts outside North America are projected to be up 8% in 2012.
Both in North America and globally, OFS firms are poised to continue on this path as crude oil gets tougher to find and extract and OFS companies continue to invest in the cutting edge technology and equipment needed to recover it.