Oilpro Weekly Review | OTC Sub-$40

We at Tradequip International would like to pass on this article recently posted on Oilpro.com. Tradequip has been an exhibitor at OTC for many years now and we’ll be there again in 2016. Through the good and bad times Tradequip International is committed to serving our loyal advertisers.

Please enjoy the article.

 

Good Morning Oilpro Readers.

The upstream industry’s biggest tradeshow is less than two months away, and OTC 2016 chatter is picking up in Houston. With the downturn deepening in its second year, the complexion of OTC is changing. For the first time in many years, there is still exhibit space available indoors at the NRG Arena this close to the event.

During the boom, I recall being told “good luck if you haven’t booked your hotel room for the May conference by early-February.” This week, we checked availability at 15 of the Houston hotels recommended by OTC organizers. Although room rates still surge an average of 80% the week of OTC, only 1 of the 15 hotels we called was sold-out during show-week. Several hotels had 30-50% of their rooms still unbooked for OTC week.

Most of these hotels were completely booked for last year’s event, when hopes of a V-shaped recovery still lingered at showtime. Even so, 2015 OTC attendance still fell 13%. This year, our channel checks suggest OTC attendance will likely decline a further 20%+. We estimate the conference will pull around 75,000 attendees (a level not seen since 2010). While this would be a step back, it should be viewed as a win. OTC attendance is highly correlated with oil prices (chart), and the last time inflation-adjusted oil prices were this low for a show was 2003 when 50,000 visitors showed up.

While foot traffic will be down, the number of exhibitors will be similar to last year. Exhibitor totals are stickier than visitors in slumps (chart) because there is a waiting list that organizers turn to for substitutes when regulars drop out. Right now, OTC 2016 has 2,659 confirmed exhibitors, down only 112 from last year (-4%). However, this statistic doesn’t tell the whole story thanks to mix shift. Beyond the 112 difference noted above, we’ve counted several hundred other dropouts this year that have been replaced by new entrants. Some big names that showed in 2015 but aren’t confirmed for 2016 include Weatherford, C&J Energy Services, Jurong Shipyard, Fugro, FloaTEC (although its parents will be there), Worley Parsons, Petrofac, Maersk Drilling, and Saipem.

Bucking the industry trend, the OTC price sheet is not showing any deterioration. On average, 2015/2016 exhibitor prices per square foot are 7% above 2013/2014 levels. As extreme cost cuts become the norm, many companies are struggling to justify the cost – not just the floor fee, but also the booth design/construction, entertaining, and employee time which all together can run into seven figures for large players. On the cost cutting front, keep an eye out for more co-marketing on the floor this year. Sharing space with other companies that offer complimentary products or services is a downturn strategy mentioned in a good OTC post by Nancy Kenney several weeks ago.

In recent years, OTC has been a place to imagine the industry’s future and explore conceptual technology. But at OTC 2016, most visitors will be focused on surviving in the present. They will be looking for commercially available solutions that lower the cost/barrel so projects work sub-$40. Successful OTC 2016 exhibitors will be the ones demonstrating value propositions that pack an immediate and clear financial punch. We’ll be walking the floor this year, and we hope to see you there. — Joseph Triepke, Oilpro Managing Director