Michael L. Peterman, president and CEO of Whittier, Calif.-based Santa Fe Rubber Products Inc., said his company's outlook for the oil and gas market is much better this year than last.
"Most of it is tied to the per-barrel price of oil," Peterman said. "When the price is under $40, everybody shuts their rigs off."
Much of what Santa Fe supplies to the oil and gas industry is "down-hole" products such as pipe protectors, which goes to customers in the North Sea, Saudi Arabia and Brazil, Peterman said. The company also does good business with natural gas producers in Colorado and the Dakotas, he said.
"When we get a lot of orders for four-inch pipe, we know those wells are being turned on," he said.
Things are going so well at Santa Fe that the company has brought back 10 old jobs, adding them at two or three per shift, Peterman said.
Bill Hyde, senior director, olefins and elastomers for Houston-based IHS Markit, said oil prices are likely to remain relatively flat in the near future, because of contradictory forces in the market.
"OPEC has moved to restrict production in an effort to bring prices up, and they're doing a better job of that than in the past," Hyde said.
Both OPEC and non-OPEC countries have held fairly well to the new restrictions, according to Hyde. But oil production from unconventional sources, such as shale, largely has neutralized OPEC's efforts, he said.
Some oil-producing countries are struggling more than others. Mendes said Venezuela is a tragic case in point.
"Venezuela is in deep trouble," he said. "It is dependent entirely on oil, and between that and an oppressive government, there's no money even to buy food."
While Norway-based Trelleborg Offshore has experienced the same oil price-based challenges as other rubber product suppliers to the oil and gas industry, the company has implemented several initiatives to be more cost-efficient, according to Managing Director Hans Leo Hals.
Material development within thermal solution and fire protection are two of the main areas for Trelleborg's offshore operation in Norway, making the company a one-stop shop for these services, Hals said.
"Our third focus is mobility of services, utilizing a Mobile Production Unit to maximize our local presence globally," he said.
The Mobile Production Unit, Hals said, is a portable facility that allows onsite coating of thermal insulation for passive fire and corrosion protection anywhere in the world.
"The ability to go to the customer's site increases project flexibility and reduces the costs as well as lead times associated with transporting parts to a specialist coating facility," he said.
Trelleborg recently completed a Next Level Report surveying rubber product manufacturers that supply the oil and gas industry. Most respondents said they believe operational efficiency within the industry is improving, Hals said.
"The report also revealed that respondents believed that suppliers have improved their negotiations on cost, availability of technologies and products, responsiveness, and alternative solutions," he said. "We see this as a positive because, as a supplier, our focus is always on putting our customers' needs first."
Trevor Clarke, marketing director of upstream oil and gas for James Walker Sealing Products & Services Ltd., said it's still a tough market and there has been considerable reorganization among the main OEM customer base.
"There's been a lot of cost-down initiatives," he said. "Obviously they're trying to remain profitable at the price of oil that's been around for some time now. Gone are the days of $100 a barrel, and they're looking for profitability around the mid-$40s. So they're looking at all of their supply chain."
While he doesn't believe the market is out of the woods yet, indicators are much more positive than they have been for the past couple of years.
And for the England-based firm, it is seeing some positive signs in the U.S. market as well.
"There are opportunities there, as a number of companies are looking to put a bigger spend with fewer suppliers, and looking at it from a strategic partner perspective," Clarke said.