Environment and Energy

Vallourec: North America to Lead Oil & Gas Market Recovery in 2017

Written by Sandy Williams

Vallourec, French-based global pipe manufacturer, is expecting challenging market conditions for the oil and gas industry for the remainder of 2016.

CEO Phillipe Crouzet said in the company’s second quarter earnings report that the oil and gas market will continue to be “significantly impacted by low demand and intense pricing.” He offered some optimism for the North American markets, however.

“North America is the only market where we very recently seen some increasing drilling activity but U.S. separators continue to focus on enhancing efficiencies and improving their cash flows,” said Crouzet. “So on the positive side in H2, ongoing inventory reduction distributors should start to dissipate progressively and prices could start recovering moderately helping to offset scrap prices evolution.”

Nicolas de Coignac, senior vice president North America said the rebound of rig activity remains small. “We can see that there are about 50 rigs more than we reached the trough. So this is not yet what can give a significant rebound in activity. However, the fact that the rig count is not decreasing any more, this is a good signal for our partner distributors that are definitely stepping out of the de-stocking process.”

According to the Baker Hughes rig data, as of July 29 there were 463 active oil and natural gas rigs in the U.S. and 119 in Canada. U.S. rigs were at the trough on May 27 with 404 active rigs and Canada on May 6 with 36 active rigs.

Crouzet said the market should begin progressive recovery in 2017 starting in North America. “As far as the rest of the world is concerned, we kind of agree with the overall opinion that the oil market should rebalance now in the very short term by the end of 2016 of this year; and this should trigger a progressive recovery of E&P [exploration and production] spending, which you know is our key driver.”

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