Activity picks up at Schlumberger
A big boost in U.S. oil company spending this year will unleash Schlumberger’s full fleet of hydraulic fracturing equipment by the fourth quarter, CEO Paal Kibsgarard said after the company reported Friday that it swung back to a profit in the first three months of the year.
The world’s largest oil field services company has begun hiring new workers to man its new trucking fleet to haul large payloads of sand, used in fracking fluids that blast open shale rock as they boost domestic oil production. Even as drillers extract oil, Schlumberger, based in Houston, Paris and The Hague, has been pouring money into sand production from its own mines, as well as rail cars, loading facilities and trucks in the United States, as domestic revenues increase.
It’s also awaiting approval from regulators to form a joint venture with Weatherford International to offer hydraulic horsepower — the powerful pumps used to blast water,
chemicals and sand underground — and so-called multistage completions technology — tools used to target different areas of a well for oil production — across all the major U.S. oil basins, heightening its rivalry with the No. 1 U.S. fracturing company, Houston-based Halliburton Co.
Halliburton, which reports its earnings next week, recently said it would hire an additional 2,000 workers across the U.S. as drilling picks up.
“The recovery will clearly be led by North America land, where investment levels are expected to increase by 50 percent in 2017,” Kibsgaard told investors. That spending boost, he said, will lead to “a strong increase in activity and an overdue correction to service and product pricing.”
Kibsgaard’s comments served as a warning shot across the bow of the U.S. oil producers, who received steep discounts from services companies during the bust. Now, with oil prices stabilizing near $50 a barrel, Schlumberger and other services providers are seeking a raise.
In a report released this week, energy research firm Wood Mackenzie said it expects oil field costs to rise 15 percent this year, lifting profits for energy services companies. Those costs will eventually catch up with oil explorers, raising the oil price at which they can break even on drilling new wells.
In the most productive shale plays, break-even costs could rise from $30 to $40 a barrel of oil to above $40 a barrel this year, Wood Mackenzie said.
Oil companies “voice the best intentions to keep a laser eye on costs,” Jackson Sandeen, senior research analyst at Wood Mackenzie, said in a statement.
“But continued productivity and drilling efficiency gains over 2016 will be difficult to achieve.”
Rystad Energy, a consultancy in Norway, noted drilling efficiency across major shale plays decreased in the first quarter, with rigs in the Eagle Ford Shale, for example, drilling 2.5 wells per month, down from three wells a month in the fourth quarter.
The number of U.S. drilling rigs continued to rise this week, increasing by 10 to 857, more than double its level last May, Baker Hughes said Friday. Texas added six of those rigs.
This week, the Energy Department said it expects daily oil production in the seven major shale basins to grow by 124,000 barrels over this month to 5.2 million barrels.
Traders this week pushed down crude prices, worried that U.S. oil production gains will pump too much oil on the market, despite an initial agreement by Saudi Arabia and other major producers to continue OPEC’s production cuts for months past its self-imposed expiration point this summer.
Oil fell $1.09 a barrel in New York on Friday, settling at $49.62, its lowest point since March 29.
In the first quarter, Schlumberger reported a $279 million profit, swinging from a $204 million loss in the fourth quarter. Still, its profit was down compared with last year’s first quarter, when the company made $501 million.