Following on from last year’s excellent E&P conference, last week saw the Oil Council’s World Oilfield Services and Engineering Assembly. One of the highlights was an interesting sell-side analyst panel discussing some key themes in engineering and oilfield services. Chaired by David Phillips, co-Head of Oil Research at HSBC, the analysts on the panel included Keith Morris (Evolution), Peter Hitchens, (HSBC), Paul Singer (Fox-Davies) and Kurt Hallead (RBC Capital Markets). The following notes can’t do justice to what was a far ranging discussion but summarises some of the key comments of interest. In line with Chatham House guidelines, comments have not been attributed.
How was the first half of 2011 for investors?
- It’s been a challenging first half. The real surprises have been obviously the political uncertainties and, closer to the industry, the environmental backlash against the oil and gas shales in the US and the ensuing backlash in Europe coupled with the fact that M&A valuations have been quite varied across the sector as well during the course of this year.
- It started off great, and then all of a sudden the macro concerns were put back into the equation but that’s the nature of the business. Everything derives from the top down. When things started to move up into Tunisia, we started to have some discussions as to whether or not that would have any ramifications on anybody in oil services and we dismissed it and, lo and behold, a week or two later it’s Egypt and then it’s Libya etc.
- So last year, it was also macro events, with Greece riots and this year it was Greece again with a different outcome. Last year was Macondo and this year, it's the Middle East and the rest. So I’d say the first few months were fun, since then it’s been a little more challenging.
- We’ve got a mismatch between the underlying industry that feels pretty confident about the way things are going with the oil price staying at a pretty strong level and underlying activity. Other than the big picture with Greece etc, it all looks pretty good.
- We’ve been surprised at how slow Brazil has been to get going and we thought that after the capital injection last year that Petrobras would have been rather more active more quickly. It’s coming through now but it’s been a little bit slower.
- We’ve been positively…
