By Rystad Energy

Digital innovation is rapidly emerging as a defining force for the oilfield services (OFS) sector as it adapts to changing market conditions, creating opportunities for steady, long-term growth. Rystad Energy predicts that in the next five years, the oil and gas industry could save more than $320 billion by further digitalizing operations in five key areas: drilling optimization, autonomous robotics, predictive maintenance, reservoir management, and logistics optimization. The OFS business ecosystem is expected to undergo a significant transformation as continued merger and acquisition (M&A) activity, new business partnerships with technology firms, and greater software integration drive digital-first business strategies for key OFS players.

“We estimate that $320 billion is a modest figure, as broader digital adoption across other business domains could generate even greater value. To realize this, executives will need to deliberately prioritize digital transformation by fostering a less risk-averse business culture,” said Binny Bagga, Senior Vice President, Supply Chain.

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The importance of digitalization, although unstandardized and sometimes difficult to measure, is more often emerging in financial disclosures. Most of the market players in the supply chain do not yet break out standalone, generally accepted accounting principle (GAAP)-level ‘digital profit’ in the same way a pure software as a service company would. However, this has slowly started to change, with SLB now reporting a digital division in its earnings. SLB expects its digital division’s margin to reach 35% on a full-year basis in 2025. Another example is Viridien, a global technology and geoscience leader. Its digital, data and environment (DDE) segment generated $787 million, growing 17% and delivering adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $458 million last year. Digital revenue streams offer more stable, resilient growth trajectories that are less exposed to the volatility of upstream capex.

“The investment community is increasingly valuing energy-technology narratives, with service companies that clearly articulate technology-driven and recurring-revenue strategies often commanding higher valuation multiples than those tied solely to equipment cycles. However, such premium valuations hinge on demonstrated scalability. Emphasizing digitalization is a direct pathway to creating lasting shareholder value,” Bagga said.

Nevertheless, widespread adoption of digital oilfields faces significant barriers, including substantial upfront costs for hardware, software, ongoing maintenance and cybersecurity. These hurdles are especially acute for smaller firms or those operating with legacy infrastructure, complicating the justification of such investments amid economic uncertainty. To mitigate these challenges, mid-tier companies are selectively enhancing their offerings with targeted digital capabilities, while smaller niche players and specialized software vendors focus on delivering modular, custom solutions.

A notable trend in digital investment is the growing use of partnerships with technology firms, which complements internal capability building and acquisitions in the digital space. The overall intensity and frequency of these partnerships have increased sharply, especially since 2021, with the most significant uptick observed in the past two years among leading companies such as SLB, Halliburton, NOV and Baker Hughes. This pattern highlights a clear industry shift toward digital transformation, with large suppliers actively accelerating their collaborations with technology partners in recent years.

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