Press release

25 Jan 2021 Oslo, NO

Recent analysis of the oil service industry: Expects a decline of 10% in 2020 and a flat positive development in 2021

EY's report on the oil service industry turns 15 years old. It is celebrated with precise predictions of the 2019 figures, a new segment and better forecasts than one might expect in and after the pandemic year 2020.

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Espen Norheim

EY Nordic Energy Corporate Finance Partner

Professional Energy Advocate and amateur rock guitarist. Based in Stavanger with keen interest within the sciences, international business and parenthood.

Related topics Oil and gas

Recent analysis of the oil service industry: Expects a decline of 10% in 2020 and a flat positive development in 2021. EY's report on the oil service industry turns 15 years old. It is celebrated with precise predictions of the 2019 figures, a new segment and better forecasts than one might expect in and after the pandemic year 2020. 

The annual report on the oil service industry was launched today by the auditing and consulting company EY. There was excitement tied to the industry’ profitability and the forecasts for the next few years. 

The analysis is based on accounting figures for 2019 and data for the development in 2020 compared with macro figures for the industry. The analysis is by far the most complete overview of the oil service industry. 

At the beginning of 2019, EY's forecasts showed revenue growth of 14.6%, as well as a positive development in profitability. This turned out to be an accurate forecast. 

- An oil service industry under hard pressure increased sales in all segments by a total of 15,6%. Many were probably positively surprised by this because the industry reports real headwinds on several fronts, but on the other hand, there are companies in the oil service industry that have had their best year in 2019, says Espen Norheim, partner in EY and responsible for the analysis. 

Margins also increased in the industry - for the first time in several years. The increase was from 2.4 percentage points to 8.1%. 

- The increase in margins (EBITDA) of 8.1% is impressive. This is probably largely due to the many cost cuts that have been made in the industry after the downturn that started in 2015. 

Without these initiatives, and the many efficiency programs that the industry has implemented, the margins would probably look very different, says Norheim. 

As a result of the pandemic, many made dramatic predictions for the oil service industry in March and April. 

- We were probably among those who were really worried, however, we did not predict the oil service industry to crash in the spring, but still, it is clear that 2020 also hit the oil service industry hard. Many companies had already cut costs and prioritized hard, but with the accurate stimulus package from the authorities, things were not looking as dark - although we probably will not see the biggest positive consequences of the package until the end of 2021 and in 2022, says Norheim. 

Historically high degree of efficiency 

After 15 years of analyses of the oil service industry, Norheim sees an industry that has taken action to operate more sustainably. 

- The industry we see today is a lean industry with a historically high degree of efficiency. As always, the industry has HSE as its highest priority, and the E- has in recent years gained an even stronger focus. The same has the will to change. We now see an industry that has taken strong action, especially on digital transformation. However, for the next 15 years it will also be much cheaper to operate well on land than in water. You can't get away from that, says Norheim. 

Norheim also expects a change in ownership over the next few years: 

- The access to capital in the industry is challenging now, and we see that general diversification, especially towards sustainable alternatives, will be even more important in the future. We will be not surprised if we see a general increase in private ownership as well as a higher proportion of low-risk models that facilitate the type of capital that seeks lower risk or return, says Norheim. 

The renewable segment is an important part of the report going forward 

New in this year's report is the renewables segment. This segment consists of battery technologies, biofuel, onshore wind power, offshore wind power, solar power, hydrogen and carbon capture. 

- The Norwegian market for renewable and green energy is dominated by large industrial players, some of which also have operations in oil and gas. There are many indications that more and more companies will focus more on, for example, offshore wind and carbon capture, with the major industrial players in oil and gas at the forefront, says Norheim.