The need for oil and gas on a global scale has grown during the last few decades. This is due to a number of factors, one of which being an increase in global economic activity. Here we present our Oilfields guide to Oil Field services.
The extraction of hydrocarbons has improved and risen globally as a result of oil and gas exploration and production to meet this need. This circumstance can benefit from oil and gas solutions.
Oil Field Services and what they are
For oil exploration and production companies, oil and gas services provide support. In both onshore and offshore applications, they include drilling, completion, production, supply, and logistics support.
Oilfield services market, in general, covers manufacturers, repairers, and maintenance companies specializing in oil extraction and transportation. From USD 135.1 billion in 2020 to USD 171.7 billion in 2025, the global oilfield services market is projected to grow at a CAGR of 3.6%.
A general description of these oil and gas service companies could be that they manufacture, repair, and maintain equipment that is used in oil extraction and transportation.
Services and Products for Oilfields
Generally speaking, when most people think of an oilfield services company, they tend to think of services like seismic testing, transport services, directional services for horizontal drillers, well building, and production and completion services.
The variety of goods and services that fall under the category of oil and gas services, however, is broad and includes numerous tech-based services that are essential for efficient field operations.
These services range widely and include finding energy sources, managing energy data, evaluating drilling and formations, and geological sciences. This oilfield services (OFS) sector offers a variety of products and services, including drilling, well construction, seismic services, production services, and well completion services.
Some oilfield service providers, including Schlumberger and Halliburton, have changed their offerings to include more technologically advanced solutions, which improves efficiency. In addition to drilling rigs, drilling equipment manufacturing, drilling goods, and drilling services are the main areas of focus for other OFS players like Helmerich & Payne.
A tracking index for ETFs named VanEck Vectors Oil Services ETF allows you to keep tabs on these businesses.
The Oil and Gas Industry
With an estimated $3.3 trillion in income per year, the oil and gas business is one of the largest in the world in terms of financial value. The world’s top producers of oil—the United States, Saudi Arabia, Russia, Canada, and China—rely heavily on it for their economies.
The complicated terminology and distinctive indicators employed throughout the oil and gas business can rapidly overwhelm investors wanting to enter the market. By outlining essential ideas and measuring criteria, this article aims to help you comprehend the fundamentals of businesses operating in the oil and gas industry.
There are three divisions within the oil and gas sector: upstream, midstream, and downstream.
Oil and gas reservoirs are found and wells are drilled by upstream, or exploration and production (E&P), businesses. Transport from wells to refineries is handled by midstream corporations, and downstream businesses are in charge of refining and selling the completed goods.
Oil and gas extraction is done by drilling businesses under contracts with E&P businesses.
On well sites, well-servicing businesses carry out relevant building and maintenance work.
An overview of how the oil and gas industry works
What do oil and gas servicing firms do may be something you are curious about. In actuality, they support oil and gas exploration efforts by doing a lot and offering a variety of services.
For instance, they build rigs, design pipes and pipelines, offer engineering services, and perform a variety of technical construction tasks, such as mechanical and electrical work and the provision of commodities.
In addition to these services, you may find others who provide transportation, logistics, security, and hospitality.
Due to a number of events, including the mega-mergers of BP-Amoco in 1998 and Exxon-Mobil in 1999 and the oil price drop in the late 1990s, OFS providers emerged in their current form. This magnitude of merger allowed for asset reorganization and optimization as well as logistical synergies.
While the benefits of these mergers were obvious in the downstream industry, the effect on the upstream industry was less obvious. In fact, internal ownership of these diverse service types led to inefficiencies and redundant cost centers, increasing the expense of providing essential upstream services without having an adverse effect on the bottom line.
A specialized oilfield services industry was able to grow as a result of these characteristics and segment splits, and it now supplies the majority of the technology and innovation required across the entire life cycle of an oil and gas operation.
What is the largest oilfield service company in the world?
You should be aware that Schlumberger is the largest oilfield services provider in the world. For instance, according to the company’s 2018 full-year results, they brought in $32.81Bn in sales. This was a 7.8% rise from the $30.44 billion in revenues for 2017
The most wealthy oil company in the world?
Companies that explore and produce oil and gas usually require oil and gas services. In this way, hydrocarbon resources can be extracted from the ground.
In terms of wealth and profitability, Saudi Aramco is the world’s largest oil business. This business made a net profit of $111.1 billion in 2018, which should demonstrate how profitable it is. Apple was outperformed here. A $59 billion net income makes it the second most profitable company. A US$388.4 billion (2018) revenue makes Shell Petroleum the richest oil company in Nigeria.
The Oil and Gas Industry’s Drilling Service
A drilling rig is used to extract oil and gas from the earth’s subsurface in oil and gas exploration. Natural gas and crude oil are the most common resources.
An oil drilling rig is made up of a collection of tools that can be used for a number of tasks, such as drilling and sample deposits as well as analyzing the physical and chemical characteristics of the rock, soil, and groundwater.
A number of rig contractors, including Transocean and Ensco, operate around the world. It is important to know that drilling rigs can either be land-based or maritime structures. Ashore rigs and offshore rigs are both referred to as rigs on land. Location, type, and drilling technique determine the type of drilling rig.
A look at what drives the oil field services industry
Revenue of OFS companies is primarily determined by capital and operating expenditures of oil and gas exploration and production companies, which in turn are determined by current and future expectations of oil and gas prices.
In addition to these factors, other factors come into play such as technological advancements, climate, seasonality of spending, availability of financing, and political factors.
Incentives for investment by these companies, however, are determined by supply and demand balances and market fundamentals.
Here are the basics of oil and gas services
A natural substance found in the earth’s crust, hydrocarbons are the building blocks of crude oil and natural gas. In sedimentary rocks such as sandstone, limestone, and shale, remains of plants and animals are compressed.
As sedimentary rocks are a result of ancient oceans and other bodies of water, they are themselves a product of ancient oceans. As sediment accumulated on the ocean floor, decaying plant and animal remains were incorporated into the rock. Under specific temperatures and pressures deep within the earth’s crust, organic material eventually transforms into oil and gas.
Gas and oil migrate through porous sedimentary rocks toward the surface of the earth because they are less dense than water. Oil and gas reservoirs are formed by trapping hydrocarbons beneath less-porous cap rock. Crude oil and gas are obtained from these reservoirs.
A drilling operation drills into the reservoir and brings hydrocarbons to the surface. The hydrocarbons can then be pumped to the surface once the drill bit reaches the reservoir. Dry holes are wells that are plugged and abandoned when they do not contain commercially viable quantities of hydrocarbons.
Explanation of Gas Production Numbers
Cubic feet are used to describe natural gas production. Similarly to oil, the term Mmcf refers to one million cubic feet of gas. Tcf stands for 1 trillion cubic feet, while BCF stands for 1 billion cubic feet.
Although they are not sized in cubic feet, natural gas futures are traded on the CME Group futures exchange. Rather, the basis for the futures contract is 1 million British thermal units, or MMBtu, which is roughly comparable to 970 cubic feet of gas. 10 Investors usually assume that a Mcf of gas is about equivalent to one MBtu because of this.
CME Group’s futures exchange trades natural gas futures, whichquivalent (BOE). To calculate BOE, companies usually convert gas production into oil equivalent production.
According to this estimate, one BOE is equal to 6,040 cubic feet of gas in terms of energy, or roughly one bbl to six Mcf. Similar to how oil may be transformed into gas, gas producers frequently speak of production in terms of Mcfe units, which are equal to units of gas.
The same bbl and mcf units are used by E&P businesses to report the amount of oil and natural gas that is still in the ground. Reserves are frequently used to evaluate E&P firms and forecast future profitability and revenue. Quantities of known oil and gas reserves must be disclosed by public oil and gas firms as additional information, not as part of their financial statements. 12
Naturally, finding new untapped reservoirs costs E&P firms a lot of time and money because they are a crucial source of future revenue. An E&P business will only have a finite amount of reserves and a decreasing amount of oil and gas if it stops investigating. Over time, revenue will certainly decrease. In other words, E&P firms can only keep or increase revenue by purchasing or discovering new reserves.
Energy Service Providers
All stages of production are covered by service firms. These businesses include Halliburton and Baker Hughes, among others. They offer a variety of services, including engineering, fluid transportation, maintenance, geological surveying, and non-destructive testing. Oil service companies profit the most when upstream production is booming, despite the fact that they operate throughout all phases.
Oil service companies’ consistent income from the midstream and downstream can help them weather downturns in upstream activity, but upstream activity is the main source of income. This is due to the fact that they have fresh business and projects to bid on.
Oil Field Services for Refineries, Oil and Gas
Although many of the businesses that refine oil also produce in the midstream and even upstream, it is just a downstream activity. Companies like ExxonMobil, Shell, and Chevron are able to produce oil from exploration all the way through to sale thanks to this integrated method.
Because human demand for many petroleum products, including gas, is price sensitive, the refining sector of the industry is actually harmed by high pricing. Value-added product sales, however, become more lucrative when oil prices decline.
Marathon Petroleum Corporation, CVR Energy Inc., and Valero Energy Corp. are three examples of purer refining plays. Due to the fact that only refined products can be exported, these businesses profit from lower energy prices and increased U.S. production. As a result, refiners can use the entire supply of shale oil, and the increased supply has reduced the cost of their inputs.
More pipeline capacity and transportation is one issue on which service providers and refiners might come to an agreement. In order to keep the cost of shipping oil by truck or rail low, refiners demand more pipeline. Because they profit during the design and construction phases and receive a consistent income from maintenance and testing, service businesses demand additional pipeline.
