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More than 200 small- and medium-sized oilfield services operators in Europe, or 20 percent of all European oilfield services firm, could go bust as the coronavirus epidemic will hit the market hard and wipe out US$5 billion worth of orders, Rystad Energy said in a new impact analysis.
Most of the hardest hit firms will be in the UK and Norway, Western Europe’s largest oil and gas producers, according to the energy research company.
Travel restrictions, quarantines, and capital expenditure (capex) cuts amid the Covid-19 outbreak will seriously disrupt the European oilfield services market, which is set to suffer this year, compared to pre-virus estimates of a flat US$47 billion market in 2020.
Most of the US$5-billion decline in orders this year, or as much as US$4.5 billion, will be in Norway and Britain, while maintenance, drilling rigs, and well services will be the hardest-hit segments, Rystad Energy has estimated.
“For Europe, this crisis is worse than the one that OFS companies experienced in 2015 and 2016 after the oil-price fall,” Audun Martinsen, Rystad Energy’s Head of Oilfield Service Research, said in a statement.
A recovery to the 2019 levels is likely to take place from 2024, Martinsen added.
The coronavirus outbreak is not only physically disrupting production, but it has also played a key role in the OPEC+ breakup and the subsequent oil price collapse. This price plunge has pushed out into the future many oil and gas development projects, according to Rystad Energy.
Aker Solutions, for example, has already warned its 6,000 employees in Norway to expect temporary layoffs this year.
“Such a fate could soon apply to many rival engineering houses in Europe as well,” Rystad Energy said.
The oil price crash hurts oilfield services firms in the U.S. too, where very few shale producers make any money when WTI is below $30 per barrel, and where even giant ExxonMobil said it would be “looking to significantly reduce spending as a result of market conditions caused by the COVID-19 pandemic and commodity price decreases.”
Halliburton, one of the world’s biggest oilfield services providers and the one with the highest exposure to U.S. shale, said earlier this week it would furlough 3,500 employees in Houston for 60 days as producers race to cut capex.
