OTC Takaways

[dan_s]

The Offshore Technology Conference was held this week in Houston. Below are takeaways from Morgan Stanley.

My take is that business is up sharply for the offshore drillers and major construction firms. I continue to believe that the offshore drillers will move first, followed by the onshore drillers mid Q3. The North American active rig count will move higher starting in June. - Dan

From Morgan Stanley:
Very upbeat outlook for offshore construction: The
vessel owning companies we met highlighted that
offshore visibility was the best it had ever been and that
Oil Company concerns over vessel availability were
generating pricing power, discussions over contracts as
far out as 2017-2018 and incentives to add capacity for
operations in 2015 and beyond. In addition, the top tier
installers highlighted that they were increasingly focused
on bidding only for the most attractive prospects, given
the volume of work, emerging capacity constraints & the
increase in higher value large contracts. We consider
this very supportive for our case of significant top-line
growth at Saipem, Technip & also Subsea 7, as well as
encouraging for margin expansion.
Encouraging comments on US OCTG Market: We
see positive read across for Vallourec given TMK’s
expectations of double-digit growth in seamless OCTG
prices above cost inflation this year and next, which is
earlier than we expected. The company expects ~5% rig
count growth this year and ~10% next year with an
additional increase in horizontal drilling and annual
tonnage per rig to more than offset the ~4% annual
capacity growth the company expects out to 2015. In
addition, Tenaris reaffirmed its view that the existing
premium connections providers (inc Vallourec) would
maintain market share and benefit from a growing global
OCTG market with ever improving product mix. The
company was skeptical over the ability of competitors to
secure market share in premium connections and the
relevance of competitor’s products in unconventional
horizontal drilling as well as increasingly high-pressure
wells.