By Steven Brady, 2018 IADC Chairman
As I think about the challenges facing us in 2018, I am reminded of that new year’s curse – “May you have an interesting year.” 2018 will almost certainly deliver that. According to Haynes and Boone, from January 2015 to October 2017, 134 North American oil and gas producers filed for bankruptcy. The sum of these filings involved $80 billion of secured and unsecured debt. Over the same period, 155 oilfield service companies filed for bankruptcy with a cumulative debt of $43.6 billion. Of the seven largest filings, five were major international offshore drillers.
Although there are concerns about the stability of the OPEC alliance and the effects of rising prices on US shale, I believe there is light at the end of this tunnel. Demand for hydrocarbons continues to increase every year. IOCs are showing good profitability again, and surveys show capital providers are reasonably optimistic about the future.
Like the E&P sector, oilfield service company returns are directly related to oil prices but, unlike E&P companies, historically there is a lag of six to 18 months before margins improve for service providers. Hopefully, the clock for that lag period has begun, and the new year will be a year of transition to a better market for all concerned.
In 2010, our industry experienced a disaster with an impact greater than any previous oilfield tragedy, and the effects of that incident have significantly changed the oil and gas business.
On the positive side, it forced us to take a hard look at how we manage process safety and to undertake fundamental improvements. On the negative side, 11 men lost their lives, the environment was damaged, and billions of dollars of value was written off by those companies directly and indirectly involved.
The sentiment of the general population and the politicians who represent them was negatively shaped (or reinforced), perhaps permanently so, by this disaster. We cannot afford another lesson like this one. Despite best wishes, more months and years of negative margins will eventually impact service quality and safety. Each of us has a role to play in ensuring that doesn’t happen.
As managers and executives, we have directed our procurement groups to secure the lowest prices for services and equipment. If this is the only criteria we ask of them, what will be the ultimate result? It is said that quality is free, and I believe that to be true. However, this assertion presupposes that there are companies left standing who can and will deliver a quality product.
Thinking back to the early days of my career, it is heartening to see all of the big improvements we have made in the areas of safety, environmental stewardship, efficiency, automation and mechanization, data gathering and analytics, training and competency and more.
Clever, bold and determined people were at the heart of all of these advances. If we are to continue to progress, we must attract more bright, energetic and diverse-thinking people to our business. Unfortunately, our success rate in at least one of these categories has been dismal. With respect to the percentage of women in the workforce, the oil and gas business is beat only by the construction industry for last place. Today, a mere 20% of our teams are comprised of women, and most of them work in non-rig site, non-technical roles.
If diversity of thought is a key to innovation and teamwork, we must seek more of it by attracting a greater number of women and a wider range of nationalities to technical roles, both in the office and at the rig site. After recruitment, we must ensure we have the performance management structure, employment conditions and mentoring arrangements to retain these employees so they can progress to the height of their capability.
It is a privilege to be elected the Chairman of IADC, and I wish to thank all of you for this recognition and the opportunity to help lead this venerable and respected organization. This year, IADC will continue to grow the ways and means that we assist companies in each of the areas I mentioned.
The association is fortunate to have highly skilled, experienced and enthusiastic staff. Under the expert leadership of Jason McFarland, IADC’s President, and with contributions and leadership from the numerous committees and chapters that work tirelessly for the industry, your association will continue to offer the best resources in the business.
In areas such as accreditation, safety and environmental protection, technical resources and advocacy, we will continue to excel and grow. In addition, we will focus to a greater extent on introducing diverse groups of young people to our business and the rewarding and exciting opportunities it can provide to individuals, nations and the world. DC