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Energy Stat of the Week by Pavel Molchanov

Energy Stat: For the First Time in Four Years, The "O" in OTC Stands For Offshore

May 13, 2019

The Offshore Technology Conference marked its 50th anniversary this year as exhibitors worldwide converged to Houston last week. Since the downturn, the conference became increasingly onshore-oriented with exhibitors displaying the latest in greatest in onshore technology. This has typically included large pressure pumping displays, the latest AC rig upgrades, and high-tech downhole tools for advanced completions. While land equipment was still notable and owned significant real estate, this year's conference marked a noticeable bent towards a more offshore-focus than just a year prior. Equipment manufacturers and service companies were buzzing about potential opportunities, pushing time-saving completions tools and designs, and discussing a renewed enthusiasm from their operator counterparts. We believe that the clear level of increased optimism and improved conference mood this year was due to 1) oil prices that have now risen enough to spur increased investment (both in brownfield/ short-cycle offshore projects as well as some discussions for new longer-term offshore projects); 2) lower breakevens and shorter time to first oil has meant operators are increasingly willing to invest, and 3) need to improve reserve replacement ratios. Just over 59,000 people attended the four-day exhibition (down for the fifth year in a row), which is down slightly from last year’s 61,000 attendees and still ~45% below recent 2014 highs. As illustrated in the graph below, attendance has historically been loosely linked to oil prices (on a lagging basis), but we have yet to see a rebound. More evident than company count was the scale of individual exhibits, with noticeably less equipment versus the downturn. The purpose of this week’s “Stat” is to highlight a few key takeaways from this year’s OTC.