Pareto World Wide Offshore AS - Pareto Project Finance
Pareto World Wide Offshore AS - Pareto Project Finance
Pareto World Wide Offshore AS - Pareto Project Finance
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
The offshore oil services marketThe psychology in the oil market has shifted to downside risks as weaker growth in China has added tothe negative effects from high OPEC production and European debt crisis. However, activity growth anddayrates in oil services is steadily building, so the long term investment cycle in oil & gas appears tocontinue unabated. However, a more risk averse approach seems warranted in the current climate.The oil and gas marketsSource: EIA, ICEThere are several factors behind the recent volatility inthe oil market, but the most prominent one is thereduced belief in China’s ability to sustain its higheconomic growth rates, which has been the primedriver behind oil prices in the past 10 years. OPEC’svery high production levels have added pressure, butalso holds the key to a reversal in the oil price as thecartel has an aim of maintaining prices at USD 100/b.Such a level is sufficient for the oil services markets tomaintain growth. Whether the oil price will resume itsupwards trend again depends on overall economicgrowth rates. The visibility on this remains low at themoment and the oil price may remain volatile within atrading band of USD 80-120/b in the meantime.Source: Barclays, PGSGlobally, the oil industry expects to invest 10% morein oil and gas exploration and production in 2012 thanit did in 2011, based on an average oil priceassumption of USD 96/b. As can be seen in the graphto the left, the oil price needs to drop to USD 80/bbefore there is any negative change in investmentplans. Right now, with the oil price trading at aroundUSD 105/b, there seems to be steady going.We have seen strong dayrate increases across theboard within oil services. On average, they are upnearly 50% in the past year. On the other hand,difficult financial markets have seen values foroffshore oil service assets tumble more than 10% inthe same period. Significantly increased earningspower can thus be bought cheaper than a year ago,which means that there is definitely a buyers marketout there.The market for floating drilling rigsSource: ODS-Petrodata, PGSThe ultra deepwater market continues to lead withfixtures now in the USD 500-600k/d range up 40-50%from the low seen in 2009. The ordering spree iscontinuing with 50 units now on order. The midwatermarket has been active recently, with fixture levelsnotching up in several areas, including UK. Activitygrowth in the Barents Sea will be particularly excitingfollowing the large discoveries in the area last year.The last licensing round offers 72 new licenses in theBarents Sea and a significant step up in drilling activitywill follow once exploration seismic on these blockshas been sampled.Source: ODS-Petrodata, <strong>Pareto</strong> Securities