As we proudly celebrate three decades of OCTG reporting this year I’ve decided to break with tradition and start my blog post from a personal perspective. First I want to thank our founder, Duane Murphy, who 30 years ago had the vision to create our exclusive inventory survey among a host of significant industry firsts that make our market intelligence the most valued OCTG resource in the oil patch. I’m honored to carry his legacy forward. Second I want to send a shout out to readers who’ve followed me through boom and bust. It is a privilege to have your attention and be part of this big “small world” we call the oil patch.
Gauging the fitness of the industry by measuring demand for OCTG throughout the entire supply chain across the lower 48 is our goal every quarter. And there’s nothing like a little bit of encouragement to jumpstart 2016. Our 4Q15 inventory yard survey proved that folks were resolved to shed some ‘pounds’ heading into the new year. Overall “prime” U.S. OCTG inventories were reduced 10% over the last 90 days. That’s a considerable amount of tons given the situation in the patch.
In the “tri-state” region (TX, OK, LA), where the bulk of the activity we track takes place, inventories were trimmed by 10%. Outside the tri-state inventories dropped -8%. Tonnage declines were seen in every product segment throughout the tri-state again this quarter. Our separate survey of select distributors in the U.S. posted healthy inventory decreases for the past quarter too, demonstrating that distributors continue to exercise discipline in managing their inventories. Details of our survey can be found in the charts, tables and commentary in this month’s OCTG Situation Report.
Another development that has helped to lift spirits in an otherwise gloomy oil patch are leaner OCTG imports. December import tonnages are estimated to be the lowest since December 2009.
While the oil markets are sure to keep everyone on the edge of their seats at least for the first half of the year, our exhaustive data on all things OCTG is sure to keep everyone on the ball. When it comes to ‘strength in numbers,’ it has been said: “information is the oil of the 21st century and analytics is the combustion engine.” On that note, we’ve beefed up our Pricing Monitor for 2016, adding 6 new items and deleting 4 to better reflect the current mix of popular line items.
We often look to U.S. E&P spending surveys to set the tone for the year, however the results of the surveys hosted by both Cowen and Company and Barclays leave much to be desired in the way of CAPEX funding. Bottom line: E&P’s continue to tighten their belts. Albeit still early in the budgeting season, Cowen & Company forecasts U.S. E&P spending to decline by 24% in 2016 based on oil prices averaging $48.50. 2015 E&P spending is estimated to have fallen by 27%. Canadian E&P for 2016 is forecast down 22%, with an estimated decline of 51% in 2015. Barclays forecasts “North American” upstream spending for 2016 to drop ~27%. Both companies anticipate refinements based on changes in oil prices going forward.
Business is bound to get even more competitive this year; perseverance is the key to survival. Interestingly, the word “persevere” contains the word “severe,” which wouldn’t have been lost on Winston Churchill who was quoted as saying, “if you’re going through hell, keep going.”