Oil giants careful of pandemic recovery
Oil field services giants Baker Hughes and Halliburton said they are “cautiously optimistic” that the industry is recovering from the worst oil bust in decades caused by the global pandemic.
The two Houston companies, however, said Wednesday that don’t expect their oil and gas customers to rush back for their services — at least not this year. That’s because most exploration and production companies have pledged to keep capital spending at historically low levels in an effort to woo back investors by earning higher profits.
As a result, Baker Hughes said it will continue its previously announced plans to close nearly 100 of its facilities this year, and Halli
burton said it will continue to “drive cost out of our North America operations.”
“Although the rig count is moving higher, we believe that the commitment toward capital discipline and maintenance-mode spending remains intact among the public exploration and production companies,” Baker Hughes CEO Lorenzo Simonelli said in a conference call with analysts Wednesday.
The tempered expectations for recovery in the oil field services sector came even as both Baker Hughes and Halliburton reported first-quarter earnings that beat Wall Street expectations.
Baker Hughes reported a loss of $452 million during the first quarter, compared with a $10.2 billion loss in the same period last year. Much of the company’s first-quarter loss came after it wrote down the value of its investment in artificial intelligence company C3.ai by $788 million. First quarter revenue fell to $4.8 billion, from revenue of $5.3 billion in the same period a year earlier.
Halliburton reported a profit of $170 million during the first quarter, compared with a loss of $1 billion in the same period last year. Firstquarter revenue rose to $3.5 billion, from revenue of $3.2 billion in the same period a year earlier.
Oil field services companies are benefiting from increased drilling and completion activity in North America as the economy heats up with the rollout of COVID vaccinations and energy demand increases. The U.S. rig count grew 27 percent during the first quarter, and oil field services companies added 23,000 jobs in March, according to Houston trade group Energy Workforce & Technology Council.
Halliburton said its North American revenue increased 13 percent to $1.4 billion in the first quarter, while Baker Hughes said its North America revenue inched up 1 percent to $625 million.
“Today, North America is staging a healthy recovery,” Halliburton CEO Jeff Miller said. “In the current oil price environment, shale operators have a larger portfolio of economically viable projects.”
Still, Baker Hughes and Halliburton are diversifying their businesses outside of its traditional oil and gas production after recent oil busts and a global shift from fossil fuels as public concerns grow over climate change. The oil-field services sector has been among the hardest-hit during the pandemic, losing more than 102,000 jobs, including 39,000 in Texas.
Halliburton is providing drilling and cementing services for geothermal wells in Indonesia, and its accelerator Halliburton Labs is investing in companies transforming plastic waste into renewable power and recycling lithium-ion batteries.
Baker Hughes is investing in liquefied natural gas, carbon-capture and storage and hydrogen. The company said it expects carbon capture to become a $35 billion to $40 billion market by 2030, and hydrogen to become a $25 billion to $30 billion market by 2030.
“We're also starting to see, even though minimal in numbers, increased traction on our offerings for carbon capture and hydrogen,” Simonelli said. “There is a pickup there relative to discussions with customers, more forwardlooking.”
Baker Hughes stock rose 4 cents to $19.55 a share. Halliburton lost 71 cents a share, or 3.6 percent, to close at $19.10.