Not long ago, I mentioned to Fools a couple of major technological improvements that have brought about tremendous increases in oil and gas reserve growth and production. At the time, I was referring to the ability to find and produce previously unreachable hydrocarbons in the deepwater and to the role of hydraulic fracturing in shale rock formations .
Each of these breakthroughs benefits from other developments that have in turn made them feasible. I’m referring to advancements that, when incorporated into deepwater operations or fracking, lead to jumps in productivity, efficiency, cost-effectiveness, and — last but hardly least — safety. In the two parts of this article, let’s take a look at a few of these new wrinkles and at some of the companies that stand to benefit from them.
By the beautiful subsea
Subsea processing relocates many of the functions typically performed at or near the surface to the well site on the seafloor. There are numerous advantages to subsea production and processing. Two especially stand out: First, a single platform is able to service numerous well areas, thereby chopping the costs related to the construction, placement, and maintenance of multiple production platforms.
Second, the separation of water, sand, and other unwanted elements from the desirable oil or gas also occurs at the seafloor. The time and expenses related to the need to haul all of the produced hydrocarbons and contaminants to the surface, before beginning the separation process (and then returning the culled elements below), are thereby eliminated.
A promising partnership
Total outlays for subsea facilities were slightly more than $25 billion in 2011. That number is expected to rocket to about $130 billion by 2020. Among several companies that will benefit from this nearly five-fold growth are Schlumberger Limited. (NYSE:SLB) and Cameron International Corporation (NYSE:CAM).
As you likely know, the pair recently hooked up in a subsea products joint venture called OneSubsea. Cameron International Corporation (NYSE:CAM) owns 60% of the venture, with the remaining 40% Schlumberger’s. I’ll describe another reason why Schlumberger Limited. (NYSE:SLB) is technologically attractive in Part 2 of this article.
In my opinion, the new partnership boosts Cameron International Corporation (NYSE:CAM)’s attractiveness meaningfully. However, the company is no neophyte to subsea equipment manufacturing, which accounts for a part of its drilling and production systems unit metrics.
Revenues from that unit increased by 22% year over year in the first quarter of this year. They thereby made up 60% of the corporate total. Now, through OneSubsea, Cameron International Corporation (NYSE:CAM) will benefit at least somewhat from Schlumberger Limited. (NYSE:SLB)’s $1.1 billion annual research and development budget, a major plus for any oil-field services company.
No longer just lightbulbs
I’d be remiss if I didn’t also mention $255 billion-market-cap industrial leviathan General Electric Company (NYSE:GE) as another way to play the burgeoning subsea world. I’ll also have more to say about GE in another area of oil and gas technology in Part 2.
For now, however, it’s important to know that the big company is involved in a rapidly expanding array of technically sophisticated oil-field services activities. Beyond subsea solutions, it’s also active in land and offshore drilling solutions and unconventional solutions. Oil and gas-related orders additions were especially strong during its newly reported June quarter.
Chevron’s new baby
Operations in the deepwater will also benefit as time passes from a technological development called dual-gradient drilling, or DGD. The new advancement is largely the child of Chevron Corporation (NYSE:CVX), and it clearly will benefit the second-biggest U.S.-based oil and gas major.