Credit rating agency, Moody’s says the global outlook for the oilfield services (OFS) and drilling industry continues to be negative as the sector experiences a severe downturn from low oil prices and reduced spending by exploration and production companies.
The agency said in a new report “Depressed Energy Prices Continue Major Shake-Up in OFS Industry” and copied to ghanabusinessnews.com, that defaults are set to increase as credit conditions deteriorate further.
The agency said global land drilling hit a 17-year low in April, after declining every month since November 2014, except for a three-month respite in mid-2015.
Additionally, rig activity in the US has decreased to its lowest point in 40 years, according to Baker Hughes rig data.
“The OFS industry is facing the worst downturn since the early 1980s after an unprecedented drop in global oil and North American natural gas prices,” Sajjad Alam, a Moody’s Assistant Vice President-Analyst said.
“Drilling activity has plummeted in most oil producing regions, curbing demand for oilfield support services.”
Alam added that Moody’s expects the rig count in the US to set a cyclical bottom in 2016 and then rise in 2017 as oil markets balance and narrow the supply/demand gap.
“As oil field services companies face tighter liquidity conditions in 2016-17 amid declining cash flows, depressed asset values, and limited revolver and market access, Moody’s expects a number of OFS companies rated B3 or lower will not survive the protracted downturn without restructuring their debt,” the agency said.