2008 great, future unknown for oilfield services sector: record high oil prices in 2008 help drive up revenues for Native-owned oilfield service contractors.

• Author: Liles, Patricia
• Position: ALASKA NATIVE BUSINESS NEWS

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Several Alaska Native corporations with oilfield service contracting subsidiaries reported increased revenue in 2008 compared to prior years, due in large part to the encouraging impact of record-high crude oil prices during the year.

"We're tied to the industry, not dollar for dollar, but when the price of oil hit over $150 per barrel, we saw our work scopes increase--the operators want to get at more oil," said Mark Nelson, president and chief executive officer of ASRC Energy Services, a subsidiary of the Arctic Slope Regional Corp. "Now there's the reverse effect in 2009 ... we're certainly seeing pressure in the industry to reduce costs."

THE BIG CHEESE

ASRC, the financial heavyweight among Alaska Native regional corporations, operates a number of different oilfield service contracting companies under ASRC Energy Services, which work on Alaska's North Slope, in Canada, the Gulf of Mexico and Russia.

In its fiscal year 2008, ASRC Energy Services reported revenues of $518 million, an increase of 9 percent over 2007 total revenues. Earnings before interest and taxes contributed $42.7 million to ASRC's bottom line, a 55.8 percent increase over EBIT reported in 2007 and a 46.7 percent increase in EBIT over 2006.

That's despite the oilfield service businesses facing "significant downward pressure from our Alaska customers," ASRC said in its 2008 annual report, as well as decreased pipeline construction, slowing onshore work in the Gulf States and project delays for the Canadian subsidiary.

"ASRC Energy Services posted strong safety and quality performance in 2008," the annual report said, adding that the sector made "significant cost reductions in its general and administrative expenses."

"We constantly look at how to become more efficient and we've done a lot of stream-lining within our own companies," Nelson said.

A WILD RIDE

Riding the cycle of fluctuating oil prices as a business manager requires some forecasting, Nelson said. "You can't get too far overextended," he added. "There's a certain amount of maintenance work that is core to our company and keeps our core employees working. Just because the price of oil drops, you can't just shut off maintenance work, whether you're producing one barrel or 700,000."

ASRC started in the oilfield service sector in the 1980s with APC, performing maintenance in the Prudhoe Bay field. "That really started the oilfield push for ASRC," Nelson said. "At the time, there were about...