We’ve written about the NAPE Expo in the past, and focused more on how different types of attendees can make the most of one of the premier upstream oil and gas conferences (read more about that here). The latest NAPE Expo gave us a glimpse of the overall optimism the upstream oil and gas industry is feeling at the moment.
Before we get into the mood of the conference and what that means for the industry as a whole, let’s clarify the use of the term NAPE Expo. It is true that the historical meaning of NAPE is the North American Prospect Expo. The organization’s website doesn’t define the acronym NAPE on a single page of the site, however. It seems our friends at NAPE have taken a cue from many other successful brands and dropped the definition of the acronym in their name (think Kentucky Fried Chicken becoming KFC or CVS pharmacies dropping their original Consumer Value Stores name). NAPE now means simply NAPE.NAPE made the change because their focus now includes the international market instead of just North America. Plus, the acronym definition made the term NAPE Expo sort of redundant – it would be like saying expo twice.
NAPE Expo 2018: An Optimistic Oilfield!
Yes, the most recent NAPE Summit was an optimistic conference; it was actually difficult to maneuver through the crowd because there were so many people on the exhibition floor.
Walking the show floor, there was a noticeable number of large oil and gas operators that were conspicuously absent in the summer and a year ago at the last NAPE Summit. Even the smaller operators didn’t seem shy about spending money on their booths. There was even a golf simulator with a Closest to the Pin game that was open to all takers.
Another good sign for a conference like NAPE was the number of vendors in attendance. We met new software companies, mineral management companies, oil and gas publications, and everything in between. Each product or service company we talked to was optimistic that conditions in the oil and gas business have taken a positive turn and remain on their way back up. Most exhibitors and attendees acknowledged that the offshore and deepwater markets are a little further removed from the recovery that the onshore E&P companies are experiencing or could expect in the coming months.
A Younger Demographic Represented at NAPE
We haven’t seen any of the official demographic figures, but there seemed to be a much younger crowd at this year’s NAPE Expo. While this observation is not the most important aspect of the conference for the coming year, it bodes well for the long-term health of the oil and gas industry.
Even though most people have forgotten about The Great Crew Change, the oil and gas industry is still approaching a time when knowledgeable, experienced hands will leave the industry for good. The downturn in the upstream sector may have actually accelerated this process, but with the decrease in activity, it is hard to tell how much knowledge we have already lost.
This is an ideal time for the oilfield to pick up some very talented young engineers, and any company with good mentorship and knowledge transfer processes in place has a great opportunity to build a young yet experienced workforce through the recovery.
Excitement About Oil
No doubt this enthusiasm about oil is due to the price recovery we have seen since the beginning of 2018. While everyone is hoping for higher oil prices, a steady price above $50 or $60 per barrel is better for the upstream oil and gas industry than temporarily high-price oil with violent swings.
It’s no secret that our industry likes predictable market conditions, even if our history of wildcatters might make outsiders believe otherwise.
Oil price stability is a huge driver for the attendees and exhibitors at the NAPE Expo, so it wasn’t a surprise to see the market focus on oil as the primary opportunity for 2018.
Things to Consider in the Coming Year
Service companies have been taking it on the chin since the start of the downturn. For all of the talk of efficiencies gained on the operator side of the equation, in reality, those efficiencies look more like a transfer of wealth from the equipment manufacturers and service companies. Service companies have historically been willing to take lower rates (some below the breakeven point) just to keep their doors open through the downturn.
We heard one gentleman on the conference floor refer to two types of companies in the oilfield – those that made it and those that didn’t. He wasn’t concerned with how badly any one business was hurt during the downturn; if you still have a shingle over your door, you are successful.
But what does that mean for the future of the service sector in the oil and gas industry? Well, we could expect that they are going to be trying to claw back any profit they can. They will make an effort to not only offset what they lost but to get their revenue back to a point that allows them to make a high enough margin to start the rehiring/rebuilding phase of the expected recovery.
To put things in perspective, oilfield service companies get on equal footing with the operators when their utilization reaches about 80 to 85%. As fleets and service techs start going back to work, they will start to get on the desirable side of the supply and demand curve.