The sector has squeezed the service firms as hard as it can, according to Expro’s chief executive.
Mike Jardon said he expects the pressure to slash costs will peter out.
“For the most part, that cost pressure has subsided,” he said.
“Most of our customers recognise that they’ve squeezed the service side as hard as they can.
“There’s always that balance for them, where they want to squeeze costs out and inefficiencies out, but if they go too far and service firms fail to retain service quality or HSE performance then they actually start to suffer the negative downside of it.
“The supplychain is always going to try to get more price. As you deal with senior leadership, they recognise there’s only so much squeeze, so I think most of that has subsided.”
It is the 25-year industry veterans second year at OTC at the helm of Expro.
“There’s more of a positive sentiment this year than there was last year, but I think we have to be careful. One of the downfalls of having OTC in the US is the influence from American land.
“The customer sentiment is the most diverse I’ve seen it in my career. If you go to a big customer that has operations in both North America land and offshore, if you go to the floor where all the land people are it’s very positive, lots of activity and everybody is very engaged.
“If you go to the next floor down it’s not quite the same buzz. It’s two opposite ends of the spectrum.
Expro has been reducing its spend for nearly three years.
“We made our first adjustments in our organisation in October 2014 and now we’re almost three years in to the cycle. They don’t usually last this long,” he said.
The length is reflected throughout his adopted city of Aberdeen, Scotland.
“You just drive through Aberdeen in rush hour now and there’s 50% less traffic. To me that is the more difficult aspect – the soft side, the people side. The number of people I know just within the industry, whether they are operators or service companies that have been laid off. That’s a challenge.”
He added: “What really keeps me up at night is the industry’s ability to attract new and diverse talent into the sector. It’s very concerning to me.”
The age profile distribution is slanted too far to the right, according to Jardon.
“Graduates are going to think my friend who graduated two years ago and went to work in the industry got released. They are going to think, ‘Do I really want to goto work for the oil and gas sector?’,” he said.
However, he added: “The customer sentiment continues to be a little more encouraging. Fundamentally for us as an industry what our customers are looking for is more oil price stability. We’ve touched down in the upper 40s, and I think if we stay in the high 40s, low 50s, I think that will encourage activity from our customers.
“Right now customers are in the ‘wait and see’ stage. They want to make sure they don’t make an investment decision too early, just because everyone is a bit fearful that commodity prices could slide back and then they would be squeezed from a cost perspective.”
For Jardon it’s not so much about the slide as it is the steady.
“What’s important to me is have some commodity price stability. As long as it stays in this $45 to $50 stage that will give some confidence to our customers to go and make some of those investment decisions,” he said.
“A lot of people want to talk about having to get back to $70, but I think all we really need is stability.
“Everyone is starting to recognise there are some growing green shoots and early indications of deepwater offshore projects. I think we are all trying to look for those and identify those.
“If customers start to make those decisions now and the next quarter, then we will begin to see the pick-up in the middle to back half of 2018.”
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