Global oil activity is picking up but US shale’s recovery from last year’s crude price crash remains subdued, Schlumberger, the world’s biggest oilfields services company, said on Friday.
Following results from rivals Baker Hughes and Halliburton on Thursday, Schlumberger on Friday reported a fall in fourth-quarter revenue but beat analyst forecasts for net income and earnings per share.
All three companies, bellwethers for the global energy industry, are confident activity will gather pace through the rest of 2021.
“We continue to be encouraged by constructive macroeconomic drivers,” said Olivier Le Peuch, Schlumberger’s chief executive.
“While the world is still grappling with Covid-19 infection rates, vaccination programmes and fiscal stimulus packages are expected to support a rebound of economic activity and oil demand recovery through the year.”
Oilfield services companies are the oil industry’s grunt workers, doing everything from drilling and fracking wells to installing pipes and turbines.
They also bore the brunt of last year’s market crash, when US oil prices plunged below zero for the first time, forcing operators to curtail drilling and spending plans.
But prices have rallied more than 60 per cent since November to more than $60 a barrel and there are other encouraging signs.
After a brutal 2020 that put scores of service providers out of business, just five declared bankruptcy in the first four months of this year, the lowest for that period since 2015, according to law firm Haynes & Boone.
Employment has picked up too, although it remains about 25 per cent below pre-pandemic levels. In Texas, drilling and production accounted for about 165,000 jobs in February, up about 5 per cent from September, according to the Texas Oil and Gas Association.
US shale operators have almost doubled the number of rigs they are operating since last year’s lows.
Compared with private equity-backed producers — currently in the throes of a mini drilling binge designed to boost cash flow and attract buyers — the sector’s listed companies have remained reluctant to spend on new drilling.
This had created “a bit of a headwind” for oilfields service providers, said George O’Leary, a managing director of Tudor, Pickering, Holt & Co, an investment bank in Houston.
This could soon change, said executives.
“North America is staging a healthy recovery,” Jeff Miller, chief executive of Halliburton, said this week. “Privates led the recovery in the first half, and we expect some public companies to increase activity in the second half of the year.”
But after years in which US shale was oil’s dominant source of growth, Schlumberger, which sold its American fracking business last year, said international activity was taking over.
“With the gradual return of oil demand, we anticipate North America activity to level off at production maintenance levels, while international activity is poised to ramp up through year-end 2021 and beyond”, said Le Peuch.
The company was expecting double-digit growth in international revenues in the second half of 2021, he added.