US oilfield services firm Weatherford is in active discussions over potential joint opportunities in the drilling business of national oil companies in the Middle East, as it expands manufacturing capacities within Saudi Arabia.
“We’re very actively [talking to clients in the Middle East], we have an Eastern Hemisphere president based here in Dubai,” said Dean Bell, president – well construction global business unit at Weatherford. “We constantly evaluate and discuss opportunities with our customers, anything that we can jointly add value are always things that we can discuss,”
He declined to comment on any specific deals.
Switzerland-headquartered Weatherford posted a net loss of $199 million (Dh730.8m) for the third quarter year-on-year. However, revenues for the Eastern Hemisphere, which includes the Middle East rose by two per cent to $682m offset by higher product sales in Continental Europe and Asia. The Middle East however grew tepidly due to lower services activity, while revenues from Russia also marked a dip due to the impact of unfavourable foreign exchange.
Weatherford, which announced sale of land drilling operations in Kuwait for around $135 million on Thursday had also divested its drilling rigs business in Saudi Arabia and Algeria, said Mr Bell.
There has been a renewed interest in the drilling segment of the energy value chain in the Middle East, which accounts for around 35 per cent of global crude production. In October, US oilfield services provider Baker Hughes said it would pay $550m for a five per cent stake in state-owned Abu Dhabi National Oil Company’s drilling entity, which has been valued at $11 billion.
Weatherford, which sees “modest improvement” in upstream activity internationally has been tracking ongoing licensing rounds in the Middle East. Licensing rounds have been launched by several national oil companies in the region, with Abu Dhabi, Sharjah, Ras Al Khaimah as well as Lebanon offering blocks to interested parties this year.
“We watch them very closely of course. Licensing rounds are the leading edge of what will eventually lead to the next exploration venture,” said Mr Bell.
However, development of blocks in the region, which has some of the cheapest hydrocarbons reserves in the world could take anywhere between two to three years until exploration and drilling, with another four to three years until development, he added.
“Again depending on the size of the development, small land fields can go from inception, to exploration to development in quarters, whereas offshore you’re talking about years,” said Mr Bell.
Weatherford, which has manufacturing capacities in the Middle East for the production of oil services equipment is currently undertaking expansion of facilities in Saudi Arabia.
“We have some operations in a joint venture in Saudi Arabia. We have some operations under our own legal entities and we’re looking at additional manufacturing capacities for both of them, so these are quarters away, it’s fairly near term,” he said.
Weatherford, which is working with a capital expenditure of $200m for the current financial year will see a moderate increase in investment spend “in line with the market,” said Mr Bell. “Capex will be increasing modestly with activity. I would say two to three years from now it will start to increase.”
The company had a lot of spare assets invested during the last upturn.
“Activity globally is still below where it was in the peak of 2014. So we have a fair amount of spare capacity in a number of our service lines,” he added.