Oil and Gas Field Services
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Industry Overview
The US oil and gas field services and equipment industry includes 8,000 companies with combined annual revenue of $89 billion. Major companies include Halliburton, Schlumberger, and Baker Hughes. Despite recent consolidation, the industry is still fragmented and characterized by small specialty firms: over half of companies have fewer than five employees.
Competitive Landscape
Demand is driven by oil and gas prices. The profitability of individual companies depends on technical expertise and efficiency of operations. Large companies can offer a broad range of services. Small firms can compete effectively by specializing in a particular type of service or geographic area. The industry is capital-intensive: average annual revenue per employee is about $410,000.
Products, Operations & Technology
Oil and gas field service companies provide drilling and support services for oil and gas wells and make drilling equipment. Drilling provides about 35 percent of industry revenue, support services 45 percent, and equipment manufacture 20 percent. Major support services include preparing wells for production, maintaining and enhancing the output of producing wells, and exploration.
Drilling a well with a drilling rig involves creating a hole using a drill bit attached to a rotating drill "string" made up of 30-foot sections of pipe. Heavy fluids ("drilling mud") are pumped down the hole during drilling to carry cuttings to the surface. Periodically, the drill pipe is pulled out and a larger diameter pipe, known as "casing," is cemented in place to protect the hole against collapse.
After drilling is finished, a well is prepared for production in a process known as "well completion." The casing is perforated at the production depth and a smaller diameter pipe (“tubing”) is inserted to allow oil and gas to flow up the well. Finally, a “Christmas tree” structure of multiple valves is attached to the top of the tubing to control the flow of oil and gas from the well.
Offshore drilling requires specialized equipment such as drillships, semi-submersible rigs, "jack-up" rigs, equipment barges, and helicopter services. Directional drilling uses special "downhole" motors or directional sleeves to drill wells at an angle.
"Workover" of the 900,000 producing wells in the US typically involves pumping steam and chemicals into a well to remove obstacles and enhance flow. "Well servicing" involves repairing or replacing down-hole equipment and plugging wells at the end of their productive life. Exploration services use sophisticated seismic equipment to identify underground geological formations that might hold oil or gas.
Specialized manufactured products include drill bits, drilling pipe, derricks, portable rigs, well monitoring instruments, valves, tubing, and drilling fluids. Rotary drilling rigs consist of a derrick, motors, pumps, winches, and other equipment. About 2,300 land drilling rigs operate in the US and Canada, and about 68 offshore drilling rigs. Workover rigs are typically smaller, truck-mounted units.
Computer technology and sophisticated sensors (including downhole "wireline" instruments) are used to explore, monitor drilling progress, assess the condition of existing wells, and monitor and control product flow from producing wells.
