Schlumberger warns of imminent fracking slowdown
The energy services company Schlumberger reported strong third quarter earning Friday, but warned of a slowdown ahead as some of its largest customers plan to stop fracking for several months because of pipeline bottlenecks in West Texas.
In a call with analysts, CEO Paal Kibsgaard said the hydraulic fracturing or fracking market rapidly weakened during the second half of the third quarter, a trend he expects to continue into next year.
“Several of our key customers have decided they're going to lay down all their frack fleets from about the middle of November up until the middle of January, which, again, is a fairly significant challenge,” Kibsgaard said.
The weakening is due to a lack of crude oil and natural gas pipelines to move oil and gas from the Permian Basin in West Texas to markets in Cushing, Okla. and the the Gulf Coast. Several major projects are under construction, but most are not expected to begin operations until at least late next year.
The slowdown in drilling is evident in the rapid growth of drilled but uncompleted, or DUC, wells, meaning they have not been fracked to start oil and gas flowing. In the Permian, DUC wells have climbed 76 percent to 3,722 in September from 2,112 a year earlier.
Kibsgaard said he sees the fracking pause as a short and temporary issue that will lower the company’s earnings in the fourth quarter. “It’s going to be a function of how severe the shutdowns are going to be in November and December,” he said.
In the third quarter, Schlumberger said its profit climbed 18 percent to $644 million, or 46 cents a share, from $545 million, or 39 cents a share, in the same period of 2017. Wall Street analysts expected returns of 45 cents a share in the quarter.
Revenues rose 8 percent to $8.5 billion from $7.9 billion in the third quarter of 2017.