The Straight Facts
Richard Spears illuminates the audience at fourth annual Sequeira Partners Energy Services Symposium
Close to 200 guests were up and out of their offices on Thursday, November 20 to join us for the fourth annual Sequeira Partners Energy Services Symposium. This year, our keynote, our energy services outlook, and our industry panel were all focused on the state of the oilfield services industry.
We were very excited to have Richard Spears, of Spears and Associates, as our guest to deliver the morning’s keynote speech. Richard brings a long resume with varied experience and expertise to every stage he visits. As a seasoned speaker, student of the oilfield, and veteran consultant, Richard had a great deal of insight to share with the audience.
We’ve gathered some of the main points of Richard’s speech in today’s post for your review.
Halliburton buys Baker Hughes
Richard spent time illuminating our audience with important statistics and information around the recent buyout of Baker Hughes by Halliburton. With companies in the energy sector trying to lessen the number of third party contractors they deal with, the addition of BHI to HAL gives the new company the ability to deliver a much wider service offering and increase competition against Schlumberger in international markets.
Richard also explained how this merger could be seen as great news for anyone competing against either of the predecessor companies. A massive merger like this is sure to require the spin-off of certain assets, which creates opportunities for smaller companies in competition with BHI and HAL to grow market share. Similarly, as many Halliburton and Baker Hughes managers will inevitably be wondering “will I have a job when the dust settles from this merger?” Richard believes that talented people will become available to growth oriented competitors.
Doing Business in a Downturn
Richard’s keynote then shifted to cover the realities of doing business in North America during a downturn, citing the current reality we are facing of declining oil prices.
The Logical Canadian Oilfield
Richard shared some simple metrics with the room that demonstrated the logical growth of the Canadian oilfield. Specifically, he displayed several key metrics (including oil prices, annual well count, and capital expenditures) and their respective growth rates between 2005 and 2014. Conveniently, the numbers tended to increase at the same rate, suggesting that the market behaved logically and that oil prices were directly correlated to Canadian oilfield activity.
The Illogical US Oilfield
Richard compared our nation’s predictability to that of our southern cousins. He showed the room the same series of metrics combined with a number of others.
- In Canada, growth in the price of oil by a factor of 1.6 led to corresponding growth in both new oil wells drilled and capital expenditures by a factor of 1.6
- In the United States, a growth factor of 1.6 in the price of oil lead to a growth factor of 2.4 in oil wells drilled, 2.6 in capital expenditures, and 6.7 in frack horsepower
With varied numbers like these, Richard pointed out; predicting how the oilfield will react in the United States is next to impossible.
Outside of Canada, companies seem to get more excited when they see a rise in oil prices, and, as such, make capital investments at a higher rate than the changes in price warrant. Canada, however, tends to follow the trends in oil prices closely, which makes Canadian markets more predictable and less volatile.
The Time is Now
From Richard’s perspective, we’re at a time in the industry where the future is at its most certain. Uncertainty arises when the price of oil sits stagnant for a number of years while spending continues to increase. It’s in slight downturns, such as the one we’re currently experiencing, that Richard claims to have always made the best investments.
Of the 32 market segments that his firm tracks, he expects most to grow by 10% this year. Cementing has been performing incredibly well, and the fracking business continues to show impressive growth.
Richard’s final point was a promising one.
“This is an industry” he remarked, “that doesn’t just grow 2-3% per year. This is a business that you can count on having 10% growth per year, over an extended time frame. But with that in mind, you have to run your business with the understanding that this is a business that grows and grows and grows.”
We were very thankful to have Richard Spears at our Sequeira Partners Energy Services Symposium. Those in attendance can attest to the value of his insights. If you were unable to attend our 2014 symposium, we hope you’ll join us for our fifth annual symposium in 2015.