Oil field firm: No rebound for shale this year
Offshore and international energy markets are making a comeback but don’t expect to see a major rebound in hydraulic fracturing or the rig count for U.S. shale drillers in 2019, Schlumberger executives said Thursday.
Ranked as the world’s largest oil field service company, Schlumberger posted a $421 million profit on $7.9 billion of revenue during the first quarter. The figures are mixed when compared with $525 million profit on $7.8 billion of revenue during the first quarter of 2018.
During a Thursday morning investors call, Schlumberger executives said they are still feeling the effects of a dramatic drop in commodity prices during the fourth quarter of 2018 that sent West Texas Intermediate crude oil prices plunging from $76 per barrel in October down to around $43 per barrel in December.
“I think that calls for another challenging year on hydraulic fracturing.” Schlumberger CEO Paal Kibsgaard
Although West Texas Intermediate crude oil is back in the $64 per barrel range, Schlumberger projects that investment for exploration and production activities in North America will be down 10 percent in 2019.
“I think that calls for another challenging year on hydraulic fracturing,” Schlumberger CEO Paal Kibsgaard told investors. “Our focus here is just to continue to drive the efficiency of our operations and then focus on the commercial terms we have with our customers.”
Schlumberger idled some hydraulic fracturing crews during the fourth quarter. Those crews have since returned to work, but Kibsgaard told investors that the company does not plan to make any additional capital expenditure investments into fracking this year.
“On the drilling side, we saw the rig count come down a bit in (the first quarter) as expected,” Kibsgaard said. “It might slide a little bit further in (the second quarter) as well. And for sure, we don’t expect any major rebound in rig activity over the course of this year.”
With nearly two-thirds of the company’s revenue coming from overseas, Schlumberger’s outlook for international markets is much more optimistic. The company views the resurging offshore market as a key driver for
international growth.
During the investors call, Schlumberger’s recently appointed chief operating officer, Olivier Le Peuch, reported that offshore projects are already leading international revenue growth in Latin America, Africa and Asia.
“We have started the year on a very positive note with 10 of the 16 geo-markets showing double-digits year-on-year revenue growth,” Le Peuch said.
James West, an analyst with
the investment research firm Evercore ISI, reported that spending on offshore and international projects is normalizing after four years of significant underinvestment and that Schlumberger is poised to benefit.
“While the investment community may have written off the offshore rig and transport subsectors in recent years, Schlumberger sees the offshore recovery as a key driver to the international growth story,” West wrote in an analysis of the company’s first quarter earnings.