Oil and Gas Equipment & Services. Jeff Ritter . Industry Overview . Support Services provided based on a fee or contract to companies involved in oil and gas extraction, and mining. Drilling, taking core samples, and making geological observations at prospective work sites.
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Oil and Gas Equipment & Services Jeff Ritter
Industry Overview Support Services provided based on a fee or contract to companies involved in oil and gas extraction, and mining. Drilling, taking core samples, and making geological observations at prospective work sites. Manufacturing oil & gas equipment and underground mining machinery. Demand is highly dependent on oil and natural gas prices.
Products and Services • Oil and gas support services (excluding drilling) • Oilfield service companies do the following: • Assist the drilling companies in setting up oil and gas wells • Manufacture, repair and maintain equipment used in oil extraction and transport. More specifically, these services can include: • Seismic Testing:Mapping the geological structure beneath the surface. • Transport Services: Moving land and water rigs • Directional Services: Not all oil wells drilled straight down. Specialized services allow service companies to drill angled or horizontal holes
Industry Terminology DAY RATEThe daily price charged to a producer for a drill rig, drilling and the associated costs of personnel and routine supplies.DAYWORK CONTRACTA work agreement that provides a basic day rate when drilling and lower rates when the rig is moving or when drilling operations are interrupted or restricted.DRILLING RIGA machine used to drill holes for oil and natural gas wells. DRILLSHIPA ship fitted with oil and gas drilling equipment.HYDRAULIC FRACTURING (FRACKING)The process of utilizing pressurized water, chemical additives and propping agents to fracture rock layers and release petroleum, natural gas or other substances so that they can be extracted. JACK-UP RIGAn offshore oil rig with a floating hull and retractable legs that can be lowered to the seabed for support.SEMI-SUBMERSIBLE RIGA mobile offshore drilling or production unit that floats on the water’s surface above the subsea wellhead and is held in position either by anchors or dynamic positioning.WELL LOGGINGThe practice of making a detailed record (a well log) of the geologic formations penetrated by a borehole. Obtained from IBISWorld
Porter’s Five Forces . Threat of New Entrants • 1000s of oil and gas service and equipment companies currently exist. • Barriers to entry exist depending on the segment of the market targeted • Drilling Services and Support : Medium • Equipment and drilling: High • Extensive amount of capital is needed to compete with the current companies
Barriers vary based on specific service provided: • Simple exploration and geological services = low • Offshore drilling services = high • Substantial working capital requirements: • Must be able to fund activity until day rate or progress payments are made.
Porter’s Five Forces Threat of New Entrants • Dominated by a few powerful companies. • Large amount of capital restricts the number of suppliers of rigs, pipeline, refining. • The small number of key players gives a significant amount of power to suppliers. Power of Suppliers
Porter’s Five Forces Threat of New Entrants • A disproportionate amount of power is shifting to the buyers. • Oil = commodity • Buyers want lower prices and superior contract terms. Power of Suppliers Power of Buyers
Porter’s Five Forces Threat of New Entrants • Alternative fuels such as coal, gas, solar power, wind power, hydroelectricity • Specialized services such as seismic drilling or directional drilling tools Power of Suppliers Power of Buyers Availability of Substitutes
Porter’s Five Forces Threat of New Entrants • Competition is high. • Companies compete based on price and quality Power of Suppliers Power of Buyers Availability of Substitutes Industry Competition
Porter’s Five Forces Threat of New Entrants Porter’s Five Forces Power of Suppliers Power of Buyers Availability of Substitutes Industry Competition
Company History • Founded in 1919 by Erie P. Halliburton • 1951: Expanded into Europe through establishing subsidiaries • 1986: First American company to perform an oilfield service job on the China mainland • 1991: Opened a branch office in Moscow • 2014: 75,000 Employees in 80 countries • World's broadest array of products, services and integrated solutions for oil and gas exploration, development and production.
What does Halliburton do? • Using the latest geological technologies, Halliburton creates data that help their customers locate oil and natural gas. • When hydrocarbons are located, they provide solutions to determine if oil and gas can be produced. • If a well is determined to be viable, theyprovide the services that allow oil and gas companies to begin production. Throughout the life of the field, theyhelp our customers maximize production and recovery, and theyhelp them realize reserves from difficult geologic environments. • Halliburton also provides well intervention, pressure control, and pipeline and process services.
Products • Sperry Drilling: • Directional Drilling: extensive experience in drilling the most complex directional wells with conventional, performance, automated and unconventional drilling systems • Drilling Optimization: experienced personnel model, measure and optimize drilling performance using a suite of advanced software and hardware tools • Testing and Subsea: • Companies must now image, target and reach reservoirs below salt layers that are thousands of feet thick. This places a premium on efficiency, technology and expertise that help reduce operators’ uncertainty in deep water. • Cementing: • Cementing protects and seals the wellbore. Most commonly, cementing is used to permanently shut off water penetration into the well. Part of the completion process of a prospective production well, cementing can be used to seal the annulus after a casing string has been run in a wellbore. Part of well abandonment.
Mature Industry Revenue grows at same pace as economy Company numbers stabilize; M&A stage Established technology & processes Total market acceptance of product & brand Rationalization of low margin products & brands
Controversies • Iraq War Contract: • Former Vice President Dick Cheney was Chairman and CEO of Halliburton from 1995-2000. • Halliburton (the only company allowed to bid) received a $7 billion dollar contract for the Iraq War. • Audits caught Halliburton overcharging the Pentagon for fuel deliveries in Iraq • 2010 Deep Water Horizon Disaster: • Designed the seal that failed. • Poor practices of Halliburton staff contributed to the disaster. • Destroyed computer simulation evidence.
Sources 1. Industry Report : Oil and Gas Field Services IBISWorld 2. Halliburton.com 3. Halliburton 10-K