Weatherford International is
an oil field service provider that is planning to capitalize on the increasing
engagement of drilling and completion activity by the oil-producing companies
in order to meet the growing global oil demand. Additionally, the crude oil
price is also improving, which in turn spurs oil producers to increase
production. Generally, the increase in production could be through drilling new
wells and using different technical advancements in existing wells to ensure
stable production. The oil producers and explorers are focusing on improving
production techniques and are expected to spend more in the coming years.
Technical advancements like efficient drilling, casing, pressure pumping, and
artificial lifting are the best practices by the oil producers across the world
to sustain long-term stable production.
Weatherford offers advanced
and wide oil field service products that include drilling service, well
construction including casing, artificial lift systems, and well-completion
systems. These products are offered individually or bundled together at the
oil-production sites. As more drilling in the oil-producing shale is expected
in coming years, the company through its operation in more than 100 countries
has viable long-term growth prospects.
Weatherford’s artificial
lift system will strengthen the top line
Artificial lift systems are
primarily used in oil wells to increase the reservoir pressure towards the
surface. This technique is useful where the natural pressure under the
reservoir is not enough to push oil upside. Thus, the oil-producing companies
use artificial lifts to recover the reservoir oil and ensure stable long-term
production from the oil producing wells. In the U.S., 96% of the total oil
wells require artificial lift techniques. The global market revenue for artificial
lift segment will reach $16 billion by 2018 with a compounded annual growth
rate (CAGR) of 9.5% from 2013 to 2018. North America has dominated the global
market of artificial lifts with 45.5% revenue in 2012. Europe, along with South
and Central America, the Middle East, and Africa, is expected to see growth in
this market by 2018.
Weatherford is one of the
leading providers of artificial lifts and holds one-third of the total domestic
artificial lift market. Weatherford’s artificial lift system ensures that the
producing company can capture more resources compared to the traditional
process. Its artificial lift system helps to reduce the maintenance cost while
increasing the well’s production life. The company’s artificial lift system
comes under its completion and production segment. This segment contributed 39%
of the total revenue during third quarter. The artificial lift system under
this segment is the key driver for revenue improvement. As a result, during the
third quarter last year, the company’s North American segment revenue improved
by 4% with stronger artificial lift results compared to the previous quarter.
Although due to increased pricing pressure, it has shown a decline in revenue
by 7% compared to 2012. With the projected market revenue growth of this
technique internationally, Weatherford should still manage to improve its top
line.
Another major player,
Schlumberger (SLB), also provides oil field services and equipment to the oil
producers. Its production group includes well intervention, completion, and
artificial lift systems. As the demand of drilling efficiency among the
oil-producing companies is increasing, more improved oil field service
techniques are provided by the oil field service providers. This focus on
efficiency is likely to create more demand for services like Schlumberger’s
HiWAY. This technique is a well-fracturing service used for the extraction of
shale oil and gas. This service has increased oil production by 20%. With the
growing demand of these products, Schlumberger experienced an 8% improvement in
its overall production group segment revenue during the fourth quarter of 2013.
Increasing rig count will be
a success factor
50% of Weatherford’s
non-core business revenue comes from its land-rig operation. Weatherford has
improved upon its consolidated revenue of $1 million during the third quarter.
The company’s formation evaluation and well construction segment contributed
61% of the total revenue. It includes drilling, casing, and laboratory services
etc., and is considered to be the primary source of Weatherford’s financial
performance. This segment’s revenue depends on the company’s working rigs in
the oil field and other drilling-related services. Although Weatherford’s total
number of rigs in North America has decreased by 4% during third quarter in
2013 due to price related issues, the company’s international rig count has
increased at a steady rate. As a result, the international revenues increased
by 6% to $129 million compared to the third quarter of 2012.
With growing oil demand,
oil-producing companies are seeking more rigs for higher production, which in
turn results in more rig counts. North America has witnessed a growth of 23
rigs last week in the U.S. and 88 rigs in Canada. Apart from that, the international
rig count has also improved. With Weatherford’s North American operation and
with increased drilling activity in the Eastern hemisphere, the company is
expected to witness a strong improvement in its formation evaluation and
well-construction revenue.
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