Dutch oilfield services analysis 2015

3Dutch oilfield service analysis 2015 |

Contents Introduction 4

Summary 6

Dutch oilfield services industry: 2014 vs. 2013 comparison 10

Rotterdam region continues to be a strong OFS hub in the Netherlands 12

Reservoir & Seismic: a global footprint to counter lower demand on the DCS 14

Drilling segment: push toward further optimization 16

Engineering, procurement and construction: sanctioned projects developed over the course of 2014 18

Operations: excellent results with production running strong in 2014 20

Activity going forward 21

Challenges and opportunities facing the Dutch OFS industry 24

Methodology 26

Abbreviations 26

Appendices 27 Strong heritage of the Netherlands in oil and gas 28

Mature exploration and production sector 30

About EY 32

Contacts 33

Thought leadership 34

4 | Dutch oilfield service analysis 2015

EY conducts regular analysis of the various North Sea oilfield services segments.

The report has been developed and expanded each year, in line with the growth of

the industry it seeks to cover. EY also issues annual reports covering the UK- and

Norwegian-based OFS industries.

We have analyzed annual financial information published by the companies in our

sample from 2010 to 2014. As such, the analysis does not reflect any recent

developments in the industry, such as the further collapse of the oil price that

continued during 2015 and early 2016. Our sample of companies includes those

we deemed to be relevant, with more to be added in future reports.

However, to complement our research, we take a moment to look ahead and discuss

opportunities and challenges the industry is facing now and in the future. In the

appendices, weve also included a snapshot of the Dutch oil and gas industry for

further information.

We hope that you find the report useful, and we welcome any feedback you may have.

IntroductionWelcome to the 2015 version of the Dutch oilfield services (OFS) industry analysis. In this report, we quantify the size of this diverse industry and analyze the dynamics across the industry.

5Dutch oilfield service analysis 2015 |

MethodologyA company is included as a Dutch OFS company if:

At least 50% of its activities is deemed to be related to the oil

and gas sector.

It is a legal entity registered in the Netherlands.

Industry segmentsWe have distinguished four segments within the Dutch OFS industry

for the purposes of our analysis:

Reservoir & Seismic

Exploration and production drilling (Drilling)

Engineering, procurement and construction (EPC)

Operations

The stand-alone financial statements of each legal entity have been

analyzed when available, to capture financial and nonfinancial information.

Large corporations have therefore not been analyzed as a group (unless

stand-alone financial statements were unavailable) but rather as the sum

of their stand-alone legal entities. We have taken this approach to show

a more detailed view of locations and activities across the industry.

Intercompany transactions are not eliminated when aggregating financial

figures. Each company has been linked to one geographic region only,

on the basis of the companys business address.

Companies have also been linked to a single segment of the OFS industry,

based on each companys assumed main activity in the sector.

Companies will most likely have activities in several geographic regions

and industry segments, but these activities have not been accounted for

in the analysis. In addition, not all financial and nonfinancial information

will relate to the Dutch activities; e.g., each companys total headcount

disclosed in the annual reports is usually a worldwide figure of full-time

equivalents (FTEs).

Please note that the completeness of our data depends on the financial

information disclosed in companies annual accounts submitted to the

Dutch Chamber of Commerce. In this respect, we have not been able

to retrieve financial information in full for all of the companies in our

sample because:

Dutch-registered legal entities are not obligated by law to publish full

profit and loss statements and balance sheets below certain thresholds.

Dutch-registered legal entities that are part of a group do not in all

cases publish (stand-alone) financial information; most often, the

parent companies disclose this information on a consolidated level.

This limits the financial analysis of the individual companies and our ability

to derive segment-specific trends. We did, however, take guidance from

listed or large companies that publish comprehensive annual reports,

including management summaries. Because of the limitations described,

numbers used for our analysis are likely to be understated rather than

overstated.

In addition, our selection of companies is not static. This means that the

2013 figures included in our 2014 report might deviate from the 2013

figures mentioned in this years report, on an aggregate level (but not on

a company-by-company basis).

6 | Dutch oilfield service analysis 2015

Summary The Dutch OFS industry covers all supply and service activities for the oil and gas industry, with emphasis on the upstream segment. Larger companies tend to operate globally and generally provide a wide range of services, while smaller companies tend to specialize and offer a specific service. As a whole, the OFS industry is a significant contributor to the Dutch economy. This sector analysis includes more than 300 companies registered in the Netherlands; roughly one-third of this sample has published financial information.

Growth in 2014From our data, we can conclude that 2014 was a productive year, with

collective revenues of 26.4b, an increase of 14% from 2013 using a

year-to-year comparison. All segments experienced growth over the

course of 2014. The increase in revenues was strong in the EPC segment,

for which revenues increased by 16%, to a total of 13.5b. The Drilling

segment achieved a growth in absolute terms of 0.5b. Operations

experienced a more modest but still significant growth of 9%, totaling

7.4b in revenues in 2014. Revenues in the Reservoir & Seismic segment

increased by 8% to a total of 3.5b. This relatively good performance in

2014 can help Dutch OFS companies survive these times of sustained

low oil prices.

The Dutch OFS industry is known for its onshore and offshore projects all

around the globe. Building on a rich heritage, the Dutch OFS industry has

fostered and expanded its profound knowledge and expertise throughout

the years. Contributing factors include the excellent and relevant Dutch

educational institutions and a reliable infrastructure. The OFS industry

in the Netherlands has established a reputation for high standards in

innovation, technology and safety standards.

The significance of the OFS industry to the Dutch economy is underpinned by the 26.4b revenue that it achieved in 2014 and the more than 95,000 people it employed during that year.

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Long-term outlookThe Dutch North Sea area has a long history of exploration and production.

Dutch onshore and offshore reserves and resources are still large, but

declining. Total oil production on the Dutch Continental Shelf (DCS) did,

however, increase in 2014 compared with 2013. This growth was a result

of the start of production within the Q13 Amstelveld by ENGIE

(formerly known as GDF SUEZ), 42 years after this field had been

discovered. This single event cannot be seen as representative for the

market developments in the Netherlands, which are characterized by a

declining long-term production outlook.

Total gas production decreased in 2014, which can be attributed to the

diminishing production of the current fields and the requirements of the

Minister of Economic Affairs to reduce production in Groningen in order

to decrease the risk of earthquakes.

Over the last years, we have seen many producers sell part of their

upstream production assets in the North Sea. Chevron sold its oil and gas

fields to Petrogas; Wintershall North Sea sold 50% of its shares to Gazprom

in return for a stake in the gas reserves of Siberia; and Eon sold oil and

gas fields off the Norwegian coast to Russian billionaire Mikhail Fridman.

Another trend in the upstream segment is the increased number of

production platforms being out of service in the North Sea. Twenty percent

of the 180 production platforms in the Dutch part of the North Sea is out

of service, compared with 5% to 10% two years ago. This would hint toward

more activity in decommissioning, as illustrated by a total of 139 fields

being expected to cease in the next five years on the North Sea, compared

with 79 fields ceased between 1996 and 2014. Decommissioning is

expected to be one of the growth areas in the OFS industry going

forward. The question is not if, but when decommissioning will

present growth opportunities to the OFS industry considering the

budget constraints of oil companies.

Although the North Sea area still offers good business opportunities for