Subsea UK - Underwater Vehicles Conference Andrew Reid President, Consulting - Westwood Global Energy 21 st November 217
Market Summary Pricing Estimated drop in prices of between 1% and up to 4% since the downturn. Both ROV & Crew Day rates and crew numbers have been cut since Q1. 215. Utilisation Widespread drop in fleet utilisation across all workscopes Some players seeing drop in utilisation by as much as 5% Outlook Market bottomed, pricing wont see improvement in next 18 24months. 218 should see a recovery in utilisation figures across the industry Execution of backlog and activity increases Retirals across the global fleet 2
Near to Medium Term Oil Supply & Demand Some oil price stabilisation in 217 as OPEC cuts reduce oversupply Still have significant excess of c.14 mmbbls global stockpiles. Net Supply-Demand Change vs Oversupply mmbbls/d 3.5 3.5 OPEC extension critical to market balance. US oil production alone expected to rise c..6 mmbbls/d in 218 2.5 1.5 1.6.9 1.3 1.5 1.5.9 2.5 1.5 Recovery Lack of project sanctioning Decline rates Demand growth Re-balancing of the market in the early 22s..5 -.5-1.5-2.5 -.5 -.1.1.1 215 216 217 218 219 22 221 Supply Additions Demand Additions Implied Oversupply w/ OPEC Cuts Suspended Q1'18 Implied Oversupply w/ Indefinite OPEC Extension -.5 -.5-1.5-2.5-3.5-3.5 3
Near to Medium Term Oil Price Outlook Oil price to range between $5-$6/bbl over the next 12 to 18 months 14 Brent Oil Spot Price $/bbl 12 1 8 OPEC Cuts Sustained Chinese Imports Global Consumption Growth Decline Rates HIGH CASE 6 4 2 Improved US Shale Efficiency Fracklog Suspension of OPEC cuts Libya & Nigeria REF CASE LOW CASE Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-2 Jan-21 Jan-22 4
Offshore Expenditure Trends: Oil & Gas Capex to come off lows, still potential volatility Offshore Capex is not expected to return to pre-downturn levels Offshore Platform Capex & Opex Spend 213-222 $bn 14 12 Opex Capex Established offshore platform base to drive demand for Opex 1 8 6 4 Opex decline c.27% between 214 and 216. Offshore platform Capex fell by c.55% as as projects were delayed or cancelled. Subsea hardware over the 218-222 period - a c.16% decline Still needs FID s 2 213 214 215 216 217 218 219 22 221 222 Subsea Hardware Capex & Subsea IMR 213-222 Capex $bn (LHS), Subsea IMR $bn (RHS) Suction Piles SURF Processing & Control TMFJ 35 Subsea Trees Pipelines Subsea IRM 3 25 2 15 1 5 5 4 3 2 1 213 214 215 216 217 218 219 22 221 222 5
Offshore Expenditure Trends: Wind A bright spot for European players Massive capex growth from offshore wind WROV s to support cable installation operations. The development of technologies which far exceed the original capabilities, could see ageing infrastructure upgraded or replaced entirely. European focused market opportunity, 1/3 expenditure in the UK Offshore Wind Capex & Opex 213-222 bn 6 5 4 3 2 1 Opex Capex 213 214 215 216 217 218 219 22 221 222 Offshore Wind Cables Spend & KM Installed 213-222 bn (LHS) KM Installed (RHS) 9 8 7 6 5 4 3 2 1 ' km Euro bn 6 5 4 3 2 1 213 214 215 216 217 218 219 22 221 222 6
Offshore Drilling & Production Outlook Drilling a key driver of WROV activity which is the largest single market Growth expected from low in 217 Offshore Drilling & Production By Region 213-222 # Wells Drilled & Kboe/d Overall levels not going to replicate recent peak in well numbers in 214 3, 2,5 Rest of World Asia Western Europe North America Middle East Production 8, 7, Offshore Gulf of Mexico drilling will remain subdued. 2, 6, 5, Very slight (c. 1% y/y) increase in Asia as E&P s look away from mature oil plays. Middle East hit hard by OPEC cuts. However assuming the OPEC cuts are suspended, production expected to increase c. 2.5% y/y 1,5 1, 5 4, 3, 2, 1, 213 214 215 216 217 218 219 22 221 222 7
WROV Market - Outlook Recovery in demand days, Offshore Wind key to recovery in Europe Drop of 33% through cycle Drill support down 37% Construction down 46% Recovery expected through 222 but not to 214 levels IMR down 22%, will recover and grow beyond 214 levels Offshore wind to grow significantly, will be ~4% of global drill support market at peak WROV Demand 213-222 # Days 2 18 16 14 12 1 8 6 4-33% 214-216 Western Europe Demand 218-222 OWF 29% Decomm. 5% IMR 11% CS 18% DS* 37% Decom is small, European focused 2 Global O&G WROV Days Global OWF WROV Days 213 214 215 216 217 218 219 22 221 222 DS* CS IMR Decomm. OWF * DS Drill Support. Source : 8
Conclusions ROV Market Macro is improving but remains vulnerable Markets expected to improve off bottom during next five years IMR, offshore wind to grow strongly WROV pricing to remain static, although utilisation should improve 9
Thank you Andrew Reid President, Consulting Westwood Global Energy, Aberdeen areid@westwoodenergy.com 1