Bullish outlook from oil field giant
The head of the world’s largest oil field services firm said he expects the rebound in U.S. shale fields to spread into international markets this year as the industry recovery broadens this year.
Paal Kibsgaard, chief executive of Schlumberger, expressed the bullish sentiments after Schlumberger reported that its fourth quarter revenues jumped 15 percent to $8.2 billion in the fourth quarter, up from $7.1 billion during the same period in 2016. But the company reported a $2.3 billion loss after writing down the value of its seismic and Venezuelan businesses.
Without those one-time accounting charges, Schlumberger said it would have earned $668 million in the fourth quarter, up 15 percent from $581 million in the third quarter.
The brightening outlook for
Schlumberger, which operates out of Houston and European hubs, comes as Brent crude, the international benchmark, recently topped $70 a barrel while the U.S. benchmark, West Texas Intermediate, has climbed comfortably above $60 a barrel. Kibsgaard told analysts that the oil bust has run its course globally and the oil glut has substantially ended as demand once again matches supply.
“The (global) oil market is now substantially rebalanced,” Kibsgaard said. “The international market is poised for growth for the first year in four years.”
Those international markets from Latin America to the Middle East to Russia are important for Schlumberger, which has a larger global presence than its rival, Halliburton of Houston, which is the U.S. market leader.
“Schlumberger set the stage for the global recovery to unfold, and for them to lead the way,” said James West, an energy analyst at the research firm Evercore ISI.
Kibsgaard said he projects oil companies to spend roughly 5 percent more internationally in 2018, while North America spending will jump 20 percent as the latest shale drilling boom continues.
That’s why Schlumberger outright purchased Weatherford International’s U.S. pressure pumping and hydraulic fracturing, or fracking, fleets in December, executives said. Nearly all of Schlumberger’s existing fracking fleets already are deployed in the United States. Kibsgaard said the company may spend $100 million this year to upgrade and deploy the 20 fleets acquired from Weatherford.
About half of them require significant maintenance and repair work, he said.
Schlumberger’s apparent willingness to modernize and deploy those fleets shows that prices, which services companies heavily discounted during the bust, are rising again, said Byron Pope, an energy analyst with Tudor, Pickering, Holt & Co. in Houston.
Schlumberger is shutting down its less profitable WesternGeo seismic business, which led it to take a $1 billion charge. Schlumberger also wrote down the value of its Venezuela business by about $1 billion because of decreasing its oil production amid political and economic turmoil in the South American country.
The company’s earnings also took a one-time hit from taxes on foreign earnings being moved to the United States under the recently enacted tax overhaul.
For the year, Schlumberger posted a $1.5 billion loss compared to a $1.7 billion loss in 2016.