Schlumberger saw its debt rating downgraded by S&P due to the unfolding slowdown in drilling by U.S. shale companies.
The largest oilfield service company in the world has seen its earnings hit as the shale industry goes through a soft patch. S&P cut Schlumberger’s debt rating to A+, down from AA-. Meanwhile, Halliburton saw its outlook downgraded from “stable” to “negative.”
Shale companies have pulled back, making modest spending cuts amid the soft patch. Moreover, the U.S-China trade war may have killed off yet another rally, with gloom spreading across the industry. Another lengthy downturn would likely deepen the modest austerity measures implemented by shale producers, which would further weigh down the oilfield services sector.
Lower drilling activity translates into less interest in the variety of services that Schlumberger offers. A depressed market for equipment, labor and other services means that companies like Schlumberger have less leverage in pricing negotiations with oil producers. Several years on from the massive oil market bust in 2014, Schlumberger has been trying to claw back the steep discounts it was forced to offer to producers.
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