Continued consolidation within the marine-drilling sector would help the sector withstand commodity-price downturns because drillers will be better able to control dayrates, says Randall P. Biang, an analyst with Fitch, the credit-ratings service. Fitch was recently formed by the merger of Fitch IBCA and Duff & Phelps. "The trend toward reducing [rig] capacity through consolidation and the retirement of drilling rigs experienced by the drilling and pressure pumping services sectors is indicative of a broader oilfield services industry trend," Biang writes in a recent report. "In general, capacity has been brought back in line with demand. As a consequence, rising demand for drilling rigs is leading to higher dayrates, which is resulting in improved profitability and cash flow for drilling companies." Biang believes the oilfield-services sector will experience improved cash flow through the next 18 to 24 months. "However, long-term industry performance will continue to be closely tied to volatile commodity prices." Fitch forecasts natural gas prices to average $2.80 per thousand cubic feet and oil to average $19.00 per barrel during the next two years-an outlook considerably lower than the short-term forecasts of some sell-side oil industry analysts. Some analysts put natural gas at nearly $5 per Mcf and oil at about $30 a barrel for at least the next several months. But, on a two-year-average basis, the Fitch posit is not far from the mark, as many sell-side analysts do not postulate further than 18 months out and their later-month perspectives are more conservative than their near-term hypotheses. Biang says, "The oilfield-service sector is perhaps in its best position in 15 years. Commodity prices are high, and world demand is growing. Other market fundamentals are much improved during the last few months and appear well-positioned for the next 12 to 18 months." But, unlike in years past, advanced oil-company spending on oilfield services will not, alone, save service-company balance sheets. "While the entire industry should benefit from this upswing, improved market position and/or capital structure strengthening will drive credit rating improvement." -Nissa Darbonne