What Oil States International said at the Barclays CEO Energy Conference
Eric is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Oil States International (NYSE: OIS) remains levered to oil and gas exploration and development activity in North America and plans to invest heavily to take advantage of expected growth in this area. The company also has significant exposure to the development of coal and other resources in Australia.
Oil States International is an oil services company that reports in four business segments - Accommodations, Offshore Products, Well Site Services and Tubular Services. The company reported Ebitda of $882 million in the twelve months ending June 30, 2012, and a 22.2% annualized return on gross invested capital in the second quarter of 2012.
Oil States International’s largest segment is the Accommodations business, which generated 50% of the company’s Ebitda. The company provides long and short term housing and other services to its customers and is leveraged to large scale development projects in Australia and Canada. Oil States International is on track to add from 2,000 to 3,000 additional rooms to its accommodations base during 2012.
Oil States International operates seven major lodges that serve the needs of oil and gas companies developing the Canadian oil sands. The company also has several other smaller facilities in the area. Oil States International reported capacity of 10,729 rooms in the seven lodges as of June 30.
Oil States International sees a promising macro picture underpinning growth in the Accommodations business in Canada. The industry is expected to sanction $50 billion in new oil sands projects in 2012 and 2013 and estimates that these projects will require an additional 35,000 to 40,000 workers by 2015.
One company that has made major investments in oil sands projects in Canada is Suncor Energy (NYSE: SU), which reported average production of 373,000 barrels of oil per day from its various projects in August. Suncor Energy is currently developing the Fort Hills Project and Voyageur Upgrader and expects to have these operations ready to start up in 2016.
Another company involved with oil sands development in Canada is Devon Energy (NYSE: DVN), which has several different projects. The company is operating the Jackfish and Jackfish 2 projects and reported net oil production of 51,000 barrels per day from these two projects in the second quarter of 2012. Devon Energy also has Jackfish 3 under construction and expects this project to start up in 2014.
Oil States International operates nine villages in Australia and reported capacity of 7,715 rooms as of July 1. The company’s room base is levered mostly to coal mining and Oil States International expects growth here to come from the development of iron ore resources and the large number of liquefied natural gas (LNG) projects under development.
Oil States International reports that 70% of all LNG projects are in Australia and estimates that capital investments for these projects may reach approximately $50 billion per year in 2014 and 2015.
One large LNG facility under construction is the Gorgon Project being built by Chevron (NYSE: CVX) off the coast of Western Australia. Gorgon will involve the development of several offshore natural gas fields and the construction of a three-train LNG plant with capacity of 15 million tons per year. The facility will transport the LNG to customers in Asia and will also supply natural gas for domestic use within Australia. ExxonMobil (NYSE: XOM) and Royal Dutch Shell (NYSE: RDS-A) each own a 25% share of the Gorgon Project, which is expected to cost at least $37 billion.
Onshore United States
Oil States International is also making investments to take advantage of the growth in domestic exploration and development and owns a fleet of mobile camps to service these areas. These include the Bakken, Eagle Ford Shale and areas in the Rocky Mountains.
Oil States International is bullish on the Accommodations business and sees continued growth in this segment supported by large projects in Canada and Australia. The company is also investing in the United States to service the increased development of domestic resource plays.
shaleplays has no positions in the stocks mentioned above. The Motley Fool owns shares of ExxonMobil. Motley Fool newsletter services recommend Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.