Q1 in line - Shell contract termination a drag on estimates

Muted 2025 growth expectations

Following Q1 earnings calls by some of the oil service companies, 2025 outlooks appear more challenging than previously. Baker Hughes expects international upstream spending to decline by mid- to high-single digits, while Halliburton sees its international revenues flat to slightly down. Furthermore, Weatherford expects 2025 international revenue to decline by low double- to mid-double digits. Precision Drilling flagged additional rig suspensions by Saudi Aramco, and SLB highlighted a slow start...

ENI capex cut but maintains shareholder returns

Driven by macro headwinds and uncertainty around trade tariffs, ENI was the first large oil company to introduce capex cuts for 2025, contributing to a more challenging business environment for oil services. Over the past five years, we estimate ENI to have been the oil major with strongest offshore spending growth, and it has been considered active and opportunistic while others have been more conservative. Hence, we see its reduction as a soft datapoint for oil services. ENI has optimised its ...

E&P spending sensitivity explored

With an oil price at the mid-USD60s/bbl level, focus on the oil major overspending situation, and resulting impact on the outlook for offshore-focused oil services, is set to increase further. While oil companies would likely cut, or even eliminate, buyback programmes first, we expect increased focus on spending reductions and efficiencies, creating a more challenging business environment for oil services. Hence, we see a risk of oil companies taking a more cautious approach, resulting in projec...

In a mid-cycle plateau

Following recent updates from E&P companies, we have reduced our 2025 offshore spending estimate to 0.5% (from c3% earlier this year). This is driven by a combination of actual 2024 spending being higher than expected (8% versus 4% previously), creating tougher comparables and a reduction in spending plans from Pemex in 2025. Despite growth flattening out, we still see the cycle building in duration, with execution of deepwater developments remaining on the agenda, albeit with a delayed executio...

Energy Morning - 17 March 2025

Energy Morning - 18 February 2025

Solid earnings visibility at 15-23% FCFE yield

Odfjell Technology (Buy, TP: NOK70.00) - Looking for H2 2025 growth

While the stock is attractively valued, we believe the company must create confidence in future growth and bring capex back to normalised levels for the investment case and upside potential to fully unfold. Management was optimistic that the activity uptick and cost cutting will progress in late 2025, helping H2 EBITDA. We see further growth for 2026e from its recently announced powered drill pipe contract. We estimate an equity cash flow yield potential of c12% in 2025, increasing to 17% in 202...

Odfjell Technology (Buy, TP: NOK70.00) - Earnings growth conviction ne...

Given some Well Services’ setbacks in 2024 (set to affect 2025), including less wired drillpipe work, we believe restoring investor confidence in earnings growth is key. We remain c10% below consensus on 2025–2026e group EBITDA, but find the valuation attractive at a 2026e EV/EBITDA of 2.2x. With recent refinancing allowing for dividend flexibility, we forecast flat dividends for 2025–2026, equal to a dividend yield of c13%. We reiterate our BUY and NOK70 target price.

Offshore spending plateauing

After reviewing major oil companies’ most recent spending plans, we estimate offshore spending growth of c3% YOY in 2025 (down from c5% late last year and c8% six months ago). We believe a combination of supply-chain bottlenecks, efficiency gains, and capital discipline among oil companies are the main reasons for spending growth fading, resulting in a mid-cycle plateau. On the flip side, the cycle keeps building duration, as we see investments being pushed into 2026–2027. Also, activity levels ...

Slow start to 2025 for offshore, but cycle duration highlighted

SLB said on its recent Q4 earnings call that it expects flat global upstream spending YOY in 2025, while Halliburton guided for flat group revenue. Both expect offshore activity to improve as the year progresses, based on numerous FIDs late-2025 and into 2026 – but implying a slow start to the year. These comments mirror feedback we have had from industry sources, although we are already seeing offshore drilling campaigns slipping towards the end of 2026, or even into 2027. Hence, their comments...

ExxonMobil update highlights efficiency, no incremental demand for oil...

From an oil services perspective, we consider the key takeaway from ExxonMobil’s corporate update to be continued high and improving capital efficiency, allowing it to do “more with less”. By 2030e, it plans to increase production by c1m barrels per day to 5.4m barrels per day on largely flat upstream capex compared to 2023–2024 levels. This implies further efficiency improvement, which we consider on the downside for the oil services industry as it implies no need for incremental service capaci...

Petrobras FPSO delays may hit service volumes but lengthen cycle

Being the largest global consumer of deepwater oil services, Petrobras’ strategic plans tend to get investor attention. On the positive side, its latest 5-year plan sees 5% higher E&P spending than the previous one, and has a more stable phasing between the years, which is supportive for the cycle duration. However, several FPSOs are facing significant delays, which is on the downside for oil services, leading to delays for deepwater oilfield services (primarily drilling and subsea), likely resu...

Odfjell Technology (Buy, TP: NOK70.00) - Growth slowing, but deep valu...

We see an increased risk of contracts in the well service segment being postponed or not renewed and have lowered our 2025–2026e EBITDA by 13–14%, leaving us c20% below consensus. The stock is trading at a 2025e FCFE yield of c17%, which we believe limits the downside risk, while we struggle to find any clear catalysts for the equity story ahead. We reiterate our BUY, but have lowered our target price to NOK70 (80).

Petrobras set to reduce 2025 capex

Petrobras is expected to reduce 2025 capex from USD21bn to around USD17bn, according to a Reuters article today. Petrobras has a 5-year capex plan, but there are usually changes to its plans, and “current year” / “near-term” spending has a track-record of being revised lower (2024 capex was recently cut c24% to USD13.5bn–14.5bn), as Petrobras has struggled with value-chain delays. The updated spending represents YOY growth in 2025 of c21% (versus c50% earlier). The article mentions equipment pri...

Limited excitement for oil services from TotalEnergies’ Strategy & Out...

With total capex set to be flattish through this decade (organic capex lower in the out-years), TotalEnergies’ Strategy & Outlook presentation provided limited excitement for oil services. Strong capital discipline and allocation was maintained, with targeted oil production growth (3%) on flattish capex and shareholder returns being a top priority. With several large-scale developments for the next few years already defined (oil services mostly contracted), we consider its plan supportive for cy...

Steady upcycle building in duration

Our 18th annual spending survey lends support to an extended upcycle for offshore-focused oil services, with 2024–2025e offshore spending growth of 5–8%. As value chain bottlenecks (FPSO, subsea) are unfolding, we believe the foundations are in place for a longer and more stable upcycle, supported by oil companies’ discipline. In sum, service companies’ discipline and oil companies’ conservativeness are likely to extend the upcycle, avoiding past ‘boom and bust’ mentality.

Limited change in EP spending

After reviewing oil companies’ most recent spending plans, we estimate offshore spending growth of c7% YOY for 2024, in line with our November update. Growth is concentrated, with Petrobras being the key driver, favouring service companies with Brazil exposure. Looking ahead, further spending growth is likely to be partly limited by total spending already being on a par with operating cash flow. Delayed energy transition spending is seen as positive for oil services, while recent E&P consolidati...

Odfjell Technology (Buy, TP: NOK80.00) - Growth pause, but deep value

Odfjell Technology rounded off 2023 with solid cash flow, helped by a working capital unwind. We believe the results leave scope for it to raise dividends this year (we forecast NOK3.3 annualised), while the company is also looking at M&A and other investments. 2024 is lining up to be somewhat slower on growth (after two strong years), but management remains upbeat for 2025 and beyond. We reiterate our BUY and NOK80 target price.