Rating agency Moody’s said yesterday it had changed its outlook for the global oilfield service sector to “negative” from “stable”.
It said this was because it expected a substantial and potentially prolonged downturn in demand for drilling and oilfield services.
Moody’s vice-president Pete Speer said: “Lower oil and natural gas prices and difficult credit market conditions have led oil and gas producers to significantly pull back their capital expenditure.
“Earnings will steadily deteriorate over 2009 as oilfield service companies contend with rapidly declining utilisation and weak pricing for their services.”
The rating agency said continuing decline in demand for crude oil and natural gas and the detrimental effects of the global recession reduced the likelihood of meaningful recovery in commodity prices in the near term.
It said the poor outlook for prices combined with oil and gas producers’ need to preserve liquidity and reduce debt levels made it likely that the downturn for oilfield services would extend into next year.
Moody’s added that a rebound in service demand would lag behind an improvement in commodity prices until producers – particularly independent exploration and production companies – were confident that price increases were sustainable and that they had sufficient visibility in demand trends.
Mr Speer said: “Oilfield service and land-drilling companies focused on North America will be the most challenged.
“The major oilfield service companies and offshore drillers have more exposure to international and deepwater markets which should provide more durability in their performance.”
Moody’s said North American onshore activity had declined most to date and would likely see further significant declines.
International markets have weakened, but should hold up better since that activity is driven by national and international major oil companies who tend to be less commodity price sensitive and more focused on long-term production goals, the agency said.
It added: “Those companies also drive much of the offshore deepwater drilling activity and therefore we expect that market to be more resilient.
“Shallow-water offshore drilling markets will continue to weaken, particularly the Gulf of Mexico.”
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