Oilfield services industry analysts are keeping their expectations low for 2025.

“We’re again lowering our global OFS activity assumptions for 2025 and beyond as market data and industry commentary continues to erode,” TD Cowen analysts led by Marc Bianchi said in their industry update Jan. 8. “With OPEC forced to hold oil off the market and a continued sluggish oil demand outlook, it’s difficult to build a case around any positive inflection.”

Flat spending and production are rippling through the business. TD Cowen forecasts a 1% increase in global oil and gas production, to 104 MMbbl/d. It expects E&P spending of $137.1 billion, also up 1% from 2024 (but down from $143.6 billion in 2023).

The analyst team at Evercore ISI led by Stephen Richardson sounded a similar note, describing OFS as a “low-expectations energy sub-sector” adjusting to weak capital expenditures.

“Oilfield services have been hit with the dual negatives of a low-growth North America with a rapidly consolidating customer base and capital restraint internationally (Saudi [Arabia], really) that has ended any semblance of a coordinated global upcycle for the industry,” they said in a Jan. 15 note. “For those prone to worry, there is plenty to go around here.”

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One possible bright side is natural gas, where futures have gained 24% in the past year to about $3.60/ MMBtu. The Evercore analysts liked the prospects of Baker Hughes Co. and TechnipFMC Plc.

“While natural gas (the commodity) is enjoying a resurgence, all elements of the gas-to-power supply chain are participating,” they said. “Baker Hughes is well positioned here, both on the LNG and smaller turbine elements of the business and a more production-levered OFS business. Likewise at Technip, the fruits of corporate action and strategy are playing out with a record backlog driving uncommon earnings visibility and little indication of the weakness/uncertainty facing the offshore drillers.”

The return of President Donald Trump isn’t likely to have a quick effect on the industry, either, said Patrick McRorie, leader of the energy practice group at the Kansas City-based law firm Lathrop GPM, which conducts an annual survey of 100 oil and gas executives.

“There is what I perceive as a misperception that because our new administration is perceived as pro oil and gas, that there's just a switch that goes off January 20th and everybody starts drilling wherever they want,” McRorie said.

Lathrop’s survey also showed that emissions reductions are slipping from previous years as a priority for the surveyed executives.

“Less than half of the respondents are talking about being committed to carbon capture, carbon reduction,” he said. “It's a very hot topic right now, pad drilling, trying to lift a barrel of oil with the most responsible stewardship footprint. People are just struggling to make it a priority because of inherent cost and then not a high enough return on investment.”

The Federal Reserve Bank of Kansas City was somewhat more optimistic with the release of its quarterly energy survey. Most members expected 2025 to show some growth over 2024.

“District drilling and business activity posted a decline for the eighth consecutive quarter in Q4, but is expected to rebound in coming months,” said Megan Williams, associate economist and survey manager. “The majority of firms expect continued growth in employment levels and capital expenditures heading into this year.”

Still, the primary factor affecting activity is price, and the current prices aren’t high enough. The firms surveyed said oil needed to reach $84/bbl (futures have been trading at about $78) for a substantial increase in drilling to occur. More natural gas drilling would require $4.66, up more than $1 from current levels.

“Long-term, companies will not make the money they need at sub-$70 oil and therefore capex will fall off, leading to lower domestic and international production, then to slightly increasing prices,” one respondent to the survey said.

In other words, it’s going to get better. Probably not this year.

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