Schlumberger echoes rivals' oil recovery predictions

Schlumberger NV on Friday joined rivals in predicting a steady recovery in the oil industry this year after the world’s top oilfield services provider’s fourth-quarter results beat estimates, aided partly by growing demand for drilling.

Easing of COVID-19 restrictions has propelled oil demand and prices, which remain stable since a late-2020 rebound from historic lows. Brent crude, which averaged at US$45 per barrel in the last quarter of 2020, hovered around US$55 on Friday.

Schlumberger chief executive Olivier Le Peuch said he was optimistic about demand recovery through this year, as rivals Halliburton Co. and Baker Hughes Co. have noted, giving investors hope the oil downturn was nearing an end.

However, Le Peuch’s timeline for a full recovery to 2019 level no later than 2023 was behind Halliburton’s view of a rebalancing next year. Baker Hughes also sees strong investment growth in 2022.

Still, Le Peuch said the reset could happen sooner, as some analysts have noted in recent weeks, with international recovery accelerating from second quarter this year and North America activity continuing to build after a strong start to the year.

“Our hypothesis going forward is that the market supply share will rebalance slightly, will favour international and will, as a consequence, pull international activity to 100 per cent or more in the next two or three years,” he told analysts on a post earnings call.

Total revenue of US$5.53 billion in the fourth quarter beat analysts’ estimates of US$5.25 billion. It’s the first quarter-over-quarter increase in revenue for Schlumberger since the third quarter of 2019.

Since taking over in July 2019, Le Peuch has focused on reshaping Schlumberger through thousands of job cuts, other steep cost cuts and divesting unprofitable businesses.

“Schlumberger ripped the cover off the ball with these results,” Tudor, Pickering, Holt and Co. analysts wrote in a note on Friday, saying the strong performance wasn’t a big surprise due to the yeoman’s work around cost cuts and improving margins and incremental fee cash flow.

Aided by cost cuts, In light of the anticipated demand recovery, Schlumberger forecast capital investments this year of between US$1.5 billion and US$1.7 billion.