Here's why yards are the biggest victims of the current oil downturn

Service providers are getting the better end of the bargain.

While the slowdown in the global oil and gas industry has dragged the earnings of both offshore service providers and shipyards, analysts caution that rig builders might face bigger revenue troubles compared to other O&M firms.

According to analysts from UOB Kay Hian, yards are susceptible to greater earnings dips, as they face weak demand and more delivery delays. Cancellation risks also remain on the horizon for yards.

“The exception is for yards with diversified capabilities producing niche production assets and strong orderbook visibility. These are expected to remain fairly resilient in this downturn,” UOB Kay Hian said.

Meanwhile, things are sunnier for service operators, with earnings expected to bounce along the bottom.

“With further rate squeeze on service providers is unlikely to yield more savings to operators, we expect dayrates and activity to stabilise,” UOB Kay Hian said.