(EnergyAsia, September 16 2011, Friday) — With global energy demand and prices expected to stay high, researchers at Norway’s DnB NOR Markets have maintained their bullish outlook on companies in the offshore oil and gas sector.
In its fifth annual survey of 65 global exploration and production (E&P) companies in (E&P), DnB NOR said they are expected to increase investment spending by 14% in 2011, 8% in 2012 and 7% in 2013.
While 2011’s growth is expected to be similar to last year’s, the industry will face higher service costs. Combined this with tight fundamentals such as an organic reserve replacement ratio of 87% and increased focus on deepwater and challenging areas, the support service companies will enjoy good earnings for “years to come”, said DnB NOR.
Its report cited other bullish factors including
• Limited downside risk as explorers will only significantly reduce their budgets if the oil price falls to US$65 a barrel. On the other hand, the service companies can expect “significant growth” if the oil price rises to US$100 a barrel. Recent developments in financial markets are not reflected in the report and could well delay decision-making processes.
• Increased spending by oil companies combined with improving utilisation in most oil services segments is likely to support near-term margin growth for the services providers. DnB NOR said its survey indicates that higher services costs now account for a larger proportion of the E&P spending growth compared to the previous two years.
• Attractive entry point. Following the market’s recent sell-off, DnB NOR said it sees several attractive investment opportunities among the services companies. Among the offshore drillers, it tips Rowan and Aker Drilling. EMGS and PGS are its top picks in the seismic sector along with FPSO company BW Offshore and STX OSV shipyard.
DnB NOR also placed buy ratings on Singapore’s main rig builders Keppel Corp and Sembcorp Marine.