The Perfect Storm shaping up in Fort St. John, BC


It's starting to look like the Perfect Storm is shaping up in Fort St. John, BC. If oil prices come back as stated below, together with the Site C Dam and an unprecedented Boom in the LNG Business, this little town of FSJ is about to go off the charts.

The article below is printed courtesy of Oil and Gas Pro;

Mid-Year OCTG Playbook: Looking For The Silver Lining

Photo Courtesy Hunting Energy Services Inc.

Every June we assess the mid-year market sentiment throughout the OCTG supply chain. It is interesting to note how the weather in Texas and much of the country’s midsection seemed in sync with so many of the observations; a somber affirmation of the expression “when it rains it pours.” Most of those with whom we spoke wondered how or for how long they will have to weather the storm that looms large over the oil patch. While optimism seemed in short supply, the fact is there are a few rays of hope on the horizon. 

While one month does not make a trend, it was encouraging to see that Texas permitting tipped up in the most recently released May report. The rig count, despite a ripple here and there, seems to signal that we’re closing in on a trough. Moreover, the combination of deep domestic OCTG production cuts together with declining import tonnages appears to be keeping a lid on inventories, a development that we will determine conclusively in our inventory quarterly survey next month. Clearly, every advancement made in the current ‘upstream’ battle has been hard-won. This confluence of catalysts is critical to bringing much needed stability to the market. 

In terms of prospective tailwinds insofar as domestic OCTG producers are concerned, the U.S. House of Representatives voted in favor of an improved trade remedy bill on June 12. The American Trade Enforcement Effectiveness Act modernizes the “injury” standard used in antidumping trade cases and includes provisions to strengthen our trade laws significantly – a decided win for the domestic steel industry. We will also remind readers that the first administrative review of the imposed duties on the affirmatively named countries in the OCTG trade case can be requested this September by either importers or domestic petitioners. 

Meanwhile, nobody needs to be reminded that oil prices are running one-third below the five-year average and the fate of OCTG for 2015 is balanced on a fragile ecosystem. While definite improvements have been seen in oil pricing of recent, much hinges on the production response if oil prices recover upwards toward $65 - $70/barrel. Domestic OCTG mills are proceeding with great caution eyeing “lean” order books and rising costs of raw materials. OCTG demand is expected to “inch up” by the end of the year while prices remain down or flat until inventory levels can be restored. If oil prices take another turn for the worst all bets are off. Distributors primary concern is reducing inventories/months of supply. Some are worried about the impact of the demand fallout on their already thin margins. 

So what will it take to turn the OCTG industry around and what will the oil patch look like five years hence? “Restraint from oil companies, OCTG producers and importers,” was the answer frequently given for the former. And in five years’ time we can expect to see “the outcome of a lot of consolidation”; suggesting for all but the leanest and most efficient of organizations the well will likely run dry as excess supply, weaker demand and uneven economic growth catch up with the oil patch. Be that as it may, don’t let this forecast rain on your parade. After all, how many folks predicted the “U.S. Shale Revolution” prior to 2007? 

Photo Courtesy Hunting Energy Services Inc.


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