The natural gas and oil industry has hit the skids since the middle of 2014, but the subsector that’s fallen into the well in the offshore could remain underwater through 2017 and “potentially longer,” according to analysts with Raymond James & Associates Inc. Gulf of Mexico operators shared similar sentiments last week.

In a note Monday, Praveen Narra and J. Marshall Adkins said the downturn in the offshore market still is “far from over.” It is “no longer a question of how low utilization and dayrates can go, but rather how long can we stay at these levels?”

Price recovery is expected by late 2016, but the offshore drilling market should lag and continue to loosen into 2017, the duo said. Because of the continued lack of incremental contracting, and not enough vessels being scrapped or stacked, analyst said the “persistent imbalance between rig supply and demand” should continue for at least two more years.

The view appears to correlate with commentary in conference calls last week to discuss third quarter results.

Oceaneering International CEO Kevin McEvoy, whose company provides subsea vessels and technology, said the Gulf of Mexico (GOM) had become a “very competitive environment,” with more vessels in the region “than there is demand.”

The Houston firm has one vessel now working on term charter but everything else is spot work. “I think we’re getting our fair share of utilization, maybe even more so,” said McEvoy. “However, pricing is pretty competitive and margins tend to be thin.”

Superior Energy Services CEO Dave Dunlap said work in the Outer Continental Shelf (OCS) “has been very slow. Most of the work that we’ve had going on on the Shelf is related to minor production maintenance work and plug and abandonment…

“I do not expect to see any increase in drilling or completions activity as long as we’re in this kind of oil price environment, and expect that most of our business on the Shelf will be related to production maintenance and plug and abandonment.”

In the GOM deepwater, where Superior generated 70-75% of its third quarter revenue, the rig count has held up “fairly well” but Dunlap said he was concerned about the lack of exploration activity taking place. However, “it kind of feels like where the market is today is probably a reasonable point to think about the deepwater market over the next few quarters.”

To date this year, only 32 rig years’ worth of contracts have been signed, marking the weakest of the past decade, according to Raymond James. The prior low was in 2009, when 70 rig years were contracted.

“Although we are forecasting an increase in oil prices, we do not expect the contracting pace for floaters to return to anywhere near normalized levels in 2016,” said Narra and Adkins.

As operators focus on balance sheets and cash flow, they have found themselves with an oversupply of contracted rigs.

Renegotiating contracts and contract terminations are playing a big role in the space today. Brazil’s Petrobras historically has been the largest customer of offshore drilling rigs with 20-25% of the floating rig count, and it’s under financial and political pressure. However, the lack of demand exists among all operators.

Raymond James now expects the anemic contracting pace of this year to continue.

“Overall, we anticipate 17 rig years’ worth of contracts will be signed for work in 2016. Similarly, between now and the end of 2017, we anticipate just 50 rig years’ worth of contracts will be signed for 2017, and this may prove to be optimistic.”