Is Oil and Gas Making a Comeback?
Figure 1 Courtesy KPMG
A large segment of Optimation’s engineering, consulting, and fabrication business is for companies that provide services to firms conducting energy exploration, especially oil and natural gas. While we provide some programming and engineering work for the “energy” companies themselves, an even greater volume of work comes from the firms that fabricate, test, and deploy downhole tools, subsea instruments, and land-based exploration products.
Collectively referred to as oilfield service companies, these are massive in size and scope. Their products and services span the globe, and face some of the most rigorous and stressful environments imaginable. Extreme temperatures, pressures, and caustic conditions are going to be encountered in the field, and therefore have to be considered in the design of the products and into the test regimens in order to validate them for use.
Optimation specializes in the development of those protocols, the high-pressure (up to 50,000psi) and high-temperature (up to 300 degrees Celsius) systems for their validation, and also the support of different test regimens for chemistries and analytics around those tools. We are well into our second decade of doing this, and have developed a significant clientele and a body of knowledge that sets us apart from other companies unfamiliar with the intricacies of this science. For years we have been a leader in this field, applying this knowledge broadly and tailoring it to each oilfield service company’s unique and specific requirements.
Table 1 Courtesy NASDAQ
As we are all aware the price of crude oil plummeted about this time two years ago. From a price over $100 per barrel in 2014, to where we are today at less than $50 per barrel, the industry got slammed with little to no warning. The results were dramatic; massive layoffs, production declines, and in many cases stalling of innovation. This affected us directly as our services quickly became temporarily shelved. What we did not know at the time was how “temporarily” would last two years.
At about the same time of the oil price decline, a wide number of industry consolidation events were going on. Acquisitions, mergers, divestitures were ongoing which were greatly complicated by the seismic shift in pricing. Many of the M & A activities were abandoned; others simply delayed. Fast forward to today and as oil is coming back from its low of about $35 per barrel, some strategic activity in the business side is again picking up.
We are seeing more interest and business activity related to acquisition and re-purposing of systems, as companies prepare for an uptick in business. Whether it’s owing to the need to recommission some dormant systems, or to design and produce new systems to support some resurgence in business, the oilfield service companies are coming back. The most recent news of note is GE’s merger of its oil and gas business with Baker Hughes to form a “new Baker Hughes”, with GE owning a majority of the new company. We know that GE never does anything halfway or half baked, and see in this a positive indicator, one among several, that the industry is on the rebound. IT goes to validate some of the impressions that this new business activity we are experiencing is becoming a trend.
We look forward to this regeneration of interest and activity in our specialized capabilities. We are expecting some gains in employment; manufacturing and production appears to be increasing in this significant energy sector. We are eager to apply our knowledge for any and all comers, and welcome inquiries about our ability to serve additional needs. Please contact Optimation with any questions or opportunities you may have. And to the oilfield service companies: welcome back, we missed you!