Independent Chinese oilfield service (OFS) providers face more challenges as the industry opens up further and the tendering and outsourcing process becomes more transparent after graft probes into the country’s oil giants.
Upstream oil and gas projects have been delayed over the last few quarters amid the corruption investigations, shrinking orders for the OFS providers, rating agency Fitch Ratings said in a statement.
Anton Oilfield Services Group’s EBITDA margin declined to 23 percent in the first half of the year, compared with a 28 percent fall a year earlier, while its competitor Petro-King Oilfield Services Ltd. saw its margin shrank to 15 percent from 24 percent. SPT Energy Group Inc.’s margin fell to 16 percent from 19 percent during the period.
But OFS providers owned by national oil companies were the least affected as they enjoy stable orders from their parents. China Oilfield Services Ltd., which is majority owned by China National Offshore Oil Corp, saw its EBITDA margin edge up to 44 percent from 43 percent.
Although order flows are likely to improve in the next 12 to 18 months as national oil companies replace reserves and increase production, margins for independent OFS are likely to be affected by the opening up of the market and greater transparency in the tendering process for outsourcing oilfield services jobs, Fitch said.
The oil services business is one of many sectors affected by President Xi Jinping’s anti-corruption drive. At least 11 former senior executives at PetroChina and its parent company China National Petroleum Corp have been ensnared in the probe.
Xi has also vowed to encourage more private participation in state-owned enterprises. The State-Owned Assets Supervision and Administration Commission has said reform towards mixed ownership in such areas as petroleum and petrochemicals, power and telecommunications, will increase.
Earlier this year, China decided to sell up to a 30 percent stake in a subsidiary of Sinopec Corp. (00386.HK), signaling more developments in the privatization of the bloated state-owned sector will take place soon.
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