Oil and gas equipment and services

Oil and gas equipment and services is a sub sector of larger oil and gas industry. The oilfield
services companies manufacture equipment and provide products and services such as drilling, and
measurement services, as well as the know-how and technical skills needed by the oil and gas
industry to explore for, extract, and transport crude oil and natural gas from the earth to the
refinery, and eventually to the consumer. Most of the oilfield services companies provide the tools,
services, and technology required to manage the entire oil and gas field life cycle. Therefore, the
level of activity in oil and gas industry influences the level of activity in oilfield products and
services industry.
The oilfield service market is very competitive, with more than 10,000 companies operating within
the industry in the United States alone. These companies vary in size and they range from small
retailers and consultants with a handful of employees to Fortune 500 companies with thousands of
employees and global operations. Competition in the industry is primarily based on price and the
quality of service, as well as the technology used.
The years 2010 – 2012 saw a surge in mergers and acquisitions (“M&A”) because of increased
competition, which spurred service companies to offer a wider range of services and increase
investment in research and development, which the larger companies are better able to afford. The
consolidations expand the companies’ foothold in the industry and ensure they can participate in
several market segments providing a wide range of products and services. During this period,
industry players were also focused on expanding acreage and drilling rights to capitalize on high oil
prices as well as evaluating and prospecting unconventional sources like shale and oil sands. The
merger activity has tapered off in 2013 as firms focused on the development of existing resources
and streamlining operations rather than on the acquisition of new assets.
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The threat to competition in this industry is weak. New entrants into the industry face various
barriers to entry, such as the high costs associated with technology and production, and the level of
government regulation within the market.