Oil company contract service providers in California and elsewhere in the United States have had to adjust their expectations for growth, and many now struggle in the market. Nasdaq points out that those who provide support to energy companies focused on exploration and production are apparently suffering from what may be long-term issues.
In order to compensate for low revenues during the oil slump in 2014, exploration and production companies began taking care of their own support services. While servicing contractors are still necessary, the initial losses continue in the form of reduced day rates, diminishing backlogs and forced efficiencies. Now, although energy explorers and producers do still make some capital investments, many have turned those investment funds inward to develop their own technology for maintaining in-house support services.
According to Bloomberg, international activity and growth and increased spending in North America during 2018 do indicate an improvement for U.S. oil field services companies. The increased prices of crude last year led to profits. However, many service providers did not benefit as much as they might have because of the rush to get gear and workers out into the oil fields. Also, exploration companies were less aggressive in their spending on service contracts due to investor pressure.
Even so, the outlook for service companies is positive, experts predict. Potential for exploration and production spending is strong, and much of the expense related to startup for contractors has already been met. With personnel in place and fleets in the field, oil company contract service providers are in a good position to become more profitable.