Demand will increase, but persistently low natural gas prices will constrain growth.
New York, NY (PRWEB) March 26, 2014
Operators in the Oil and Gas Field Services industry primarily provide services to oil and gas extractors, making demand highly dependent on oil and natural gas prices. Accoring to IBISWorld Industry Analyst David Yang, “During the past five years, divergent US and global energy prices stemming from the recession resulted in volatile year-on-year revenue growth.” Nevertheless, revenue has increased overall due to steadily growing global demand for energy and recovery from recession lows. In the five years to 2014, IBISWorld expects revenue for the Oil and Gas Field Services industry to increase at an annualized rate of 11.5% to $114.3 billion.
Rising oil and gas prices typically result in increased demand for industry services, especially if prices are expected to remain high. The number of oil and gas drilling contracts rises with prices because previously unprofitable sites become more attractive to producers. In contrast, demand falls when oil and gas prices are low. In 2009, revenue plummeted 33.8% due to sharp declines in crude oil and natural gas prices. “The following year, recovering energy prices fueled revenue growth of 39.1%, although government offshore drilling regulations increased in the aftermath of the Deepwater Horizon oil spill crisis,” says Yang.
US natural gas prices have plummeted since 2010, falling 11.8% and 32.7% in 2011 and 2012, respectively. Domestic crude oil prices were also relatively lower than international prices. As a result, demand for industry services slowed. Commodity prices are anticipated to stabilize in 2014, as exports and consumption reach prerecession levels, leading to an anticipated revenue increase of 1.4% over the year. Volatile natural gas prices have also negatively affected industry profitability. Profit margins reached a low in 2009 before gradually recovering in 2014, although it remains below prerecession levels.
Demand for oil and gas field services is projected to rise over the next five years as the global economy recovers. However, low US natural gas prices will likely continue to constrain industry growth. Stringent offshore drilling permit regulations in the Gulf Coast will also offset some revenue gains derived from an increase in crude oil prices. Nevertheless, US natural gas prices are forecast to slowly increase as US crude oil prices are expected to converge on international prices, resulting in positive revenue growth. In the five years to 2014, industry revenue is forecast to increase.
For more information, visit IBISWorld’s Oil and Gas Field Services in the US industry report page.
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IBISWorld industry Report Key Topics
Operators in the Oil and Gas Field Services industry provide support services on a fee or contract basis to companies involved in oil and gas extraction, mining and quarrying. Industry operators may also provide services such as drilling, taking core samples and making geological observations at prospective work sites.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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