Contrast in results for two oil field giants
The performance of two of the world’s largest oil field services companies diverged in the third quarter, with Schlumberger touting its biggest profit in two years and Baker Hughes posting a $104 million loss during its first three months as part of the General Electric family of companies.
The outlook of the top executives
from both companies, however, was similar. They see a rebound taking shape internationally but signs that the recent boom in West Texas shale fields is languishing,
The number of rigs drilling for oil in the U.S. peaked in August at 768 rigs and has fallen since to 736, the lowest since the beginning of June, Baker Hughes said Friday.
Baker Hughes reported $5.4 billion in revenues in the third quarter, its first since merging with GE’s oil and gas division. The results fell below expectations, executives said, but the integration of the two companies may not be complete until mid-2018.
“We expect activity to stay flat until the end of the year,” said Baker Hughes CEO Lorenzo Simonelli, who previously headed GE Oil & Gas. “Oil prices remain volatile, and as a result, our customers remain cautious.”
Schlumberger, the world’s largest services company, reported a $545 million profit in the third quarter, with revenue rising more than 13 percent over the year to $7.9 billion. CEO Paal Kibsgaard attributed virtually all of the growth to the onshore U.S. market, which, he said, is decelerating.
“The production growth is so far falling short of expectations,” he said.
Still, Kibsgaard said, Schlum-
berger is banking on growing its North American market share in hydraulic fracturing, or fracking, once it finalizes a joint venture with the smaller oil field services company Weatherford International. The deal is expected to close by year-end.
Schlumberger would own 70 percent of the joint venture, which aims to help the company catch the leader in North American fracking, Halliburton of Houston. Halliburton reports third-quarter earnings on Monday.
Internationally, Kibsgaard told analysts that he sees signs of growth in Russia, the North Sea and the Middle East.
“We’re increasingly positive about the outlook for our global business, ” he said.
Part of that rosy view comes from oil prices. The benchmark U.S. oil price settled at $51.47 a barrel on Friday, up 18 cents for the day, while the international benchmark from the North Sea settled at $57.75 per barrel, an increase of 52 cents.
North of the border, Schlumberger is expanding in Canada with its newly announced deal to buy Cenovus Energy’s oil and gas holdings in Alberta’s Palliser region for $1 billion in a joint venture with a private Canadian company, Torxen Energy.
Torxen will lead the joint venture with Schlumberger in acquiring 800,000 acres of oil and gas development rights, existing wells, surface facilities and a pipeline network. The deal helps Schlumberger diversify into exploration and production.
The outlook for the U.S. offshore sector, however, remains glum, Kibsgaard said.
“In the U.S. Gulf of Mexico, activity continued to weaken in the third quarter, and the outlook remains bleak for this region based on current customer plans,” he added.