• 14 hours US to rejoin Paris climate pact by 2020?
  • 17 hours We're worried about US shale production, while OPEC calls for $10 trillion investment to meet demand?
  • 12 hours NASA Spends $1 Billion For a Launch Tower That leans, May Only be Used Once
  • 16 hours Iran To Recover War Losses By Exploiting Syria Natural Resource !?
  • 1 hour API Inventory Data (Tuesdays)
  • 12 hours Exxon sues the suers in climate-change case
  • 8 hours Venezuela's New Bitcoin: An Ingenious Plan or Worthless Cryptocurrency?
  • 17 hours Israel Strikes "Historic" Gas Deal With Egypt
  • 18 hours Ohio to Ban Oil, Gas Entirely?
  • 17 hours Ireland 2040 - 116 Billion Pounds For Infrastructure Projects Around The Country
  • 12 hours Cryptocurrencies ‘Could drop to near-zero at any time’
  • 19 hours EIA Inventory Data (Wednesdays)
  • 18 hours DOA to invest $6.5M in coal industry
  • 17 hours Is Global Warming Good For Humanity After All?
  • 19 hours Gold Bust could see $1000/oz
  • 12 hours Vanadium: The Next Star in Batteries?
Alt Text

Oil Price Correction Unlikely To Harm European Majors

European oil majors have performed…

Alt Text

Oil Majors Optimistic Despite Price Plunge

Oil prices have plunged in…

Alt Text

Offshore Oil Is Poised For Significant Growth

United States shale is seeing…

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

More Info

Oilfield Services Bounce Back On Oil Rally

rig gas

The oilfield services industry was hit hard by the 2014 oil price crash after exploration and production companies reduced investments and drilling during the downturn. The ripple effect on the oilfield services business was fewer wells to drill, lower day rates amid competition to obtain drilling contracts, and thousands of layoffs.

But the oil price rally at the end of 2017 is now spreading optimism among the biggest oilfield services providers — an upbeat mood they haven’t exhibited in four years.

The pick-up in shale activity last year supported some of the oilfield services groups’ revenues and margins, but it still wasn’t enough for an overall optimistic outlook in their Q3 financials. The Q4 earnings releases of the world’s biggest oilfield services groups — Schlumberger and Halliburton — however, showed an upbeat outlook on the recovery of the international markets, for the first time in years.

After three difficult years for E&P firms and oilfield services providers, the rise in oil prices in the second half of 2017 — along with the huge cost cuts across the board — led to Big Oil calling the end of austerity and looking to start rewarding shareholders by removing scrip dividends and resuming share buybacks.

While oil majors declared the downturn over with their Q3 2017 better-than-expected earnings, oilfield services providers were still languishing in supply chain hell, with the only positive note — to some extent — being North American shale. Related: This World Class Gas Field Is About To Start Producing

Now Schlumberger and Halliburton — which reported Q4 earnings in the past week — not only beat analyst forecasts, but also signaled optimism for 2018, expecting a busy North American shale activity and, for the first time in a few years, growth (albeit choppy and slim) on international markets.

Schlumberger’s earnings per share (EPS) excluding charges increased 14 percent sequentially to $0.48 in Q4, beating the $0.44 consensus estimate. North America revenue rose 8 percent on the quarter, while international revenues increased 2 percent.

“In North America, 2018 shale oil production is set for another year of strong growth, as the positive oil market sentiments will likely increase both investment appetite and availability of financing,” Schlumberger chairman and CEO Paal Kibsgaard said.

“In the international market, we expect growth in all regions in 2018 for the first time since 2014,” Kibsgaard said at the Q4 earnings call.

After Schlumberger, it was Halliburton’s turn. Earlier this week, Halliburton reported adjusted income from continuing operations at $0.53 per diluted share for Q4, beating the $0.46 consensus forecast.

Halliburton’s international business started to show signs of recovery in the latter part of 2017, driven primarily by improved performance in the Middle East, the North Sea, and Latin America, president and CEO Jeff Miller said at the earnings call.

“I believe that the U.S. land market will be very busy in 2018 and that demand for horsepower will continue to grow,” Miller noted, adding that “As for the international markets, I am encouraged for the first time in three years.”

The top manager noted that the recovery would likely be choppy, but still, the signs are there that the international market for oilfield services is improving along with the rise in oil prices.

What’s more, Halliburton expects the higher price of oil and demand for equipment to provide “runway for us to continue to increase our pricing through the first half of the year,” Miller said.

The cost inflation may be a curse for the E&P companies, but it’s a welcome boon for the oilfield services industry that has suffered from the very low pricing during the downturn. Related: The Biggest Year Yet For U.S. Shale

Not only the world’s largest oilfield services providers are upbeat on the 2018 prospects for the industry — analysts also say that there are reasons to believe that the oilfield services business is starting to exit survival mode.

Amid rising oil prices, E&P companies raised capital expenditures in North American shale and the number of offshore projects by more than 50 percent in 2017, which resulted in a restart of the oilfield service industry, Rystad Energy said in a report last month. Companies that beat the overall market were mostly those exposed to North American shale, while laggards are mainly exposed to the offshore and subsea markets.

“Suppliers in the U.S. have started hiring and have been increasing their workforce by 2% every month since October 2016. For the offshore market, suppliers have stepped down lay-offs and are in the last phase of completing workforce reductions,” Rystad said.

The consultancy expects offshore and onshore greenfield projects worth as much as $200 billion to be sanctioned globally this year, which would result in an average of 4-percent service price inflation.

Judging from the upbeat outlooks from Halliburton and Schlumberger, this year could finally mark the end of the downturn for the oilfield services business.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News