Schlumberger optimistic about recovery in oil demand

Global oil activity is picking up, but the recovery in U.S. shale from last year’s drop in crude prices remains subdued, Schlumberger, the world’s largest oil services company, said on Friday.

Following the results of rivals Baker Hughes and Halliburton on Thursday, Schlumberger reported lower fourth-quarter earnings on Friday, but beat analysts’ forecasts for net income and earnings per share.

The three companies, forerunners of the global energy industry, are confident that activity will accelerate until the end of 2021.

“We continue to be encouraged by constructive macroeconomic drivers,” said Olivier Le Peuch, Managing Director of Schlumberger.

“As the world continues to grapple with high rates of Covid-19 infection, vaccination programs and fiscal stimulus packages are expected to support a rebound in economic activity and the recovery in oil demand throughout. of the year.”

Oil service companies are the rough workers of the oil industry, doing everything from drilling and fracturing wells to installing pipes and turbines.

They also took the brunt of last year’s stock market crash, when U.S. oil prices first fell below zero, forcing operators to cut back on drilling and spending plans.

But prices have risen more than 60% since November to over $ 60 a barrel and there are other encouraging signs.

After a brutal 2020 that put many service providers out of business, only five declared bankruptcy in the first four months of this year, the lowest for this period since 2015, according to Haynes & Boone law firm.

The job has picked up also, although it remains about 25% below pre-pandemic levels. In Texas, drilling and production accounted for about 165,000 jobs in February, up about 5% from September, according to the Texas Oil and Gas Association.

U.S. shale operators have nearly doubled the number of rigs they operate since lows last year.

Compared to privately-backed producers – currently in the throes of a mini-drilling frenzy designed to increase cash flow and attract buyers – listed companies in the sector have remained reluctant to spend on new drilling.

This has created “a headwind” for oil service providers, said George O’Leary, managing director of Tudor, Pickering, Holt & Co, an investment bank in Houston.

That may soon change, executives said.

“North America is enjoying a healthy recovery,” said Jeff Miller, CEO of Halliburton this week. “Private companies led the recovery in the first half of the year, and we expect some SOEs to increase their activity in the second half of the year.”

But after years in which U.S. shale was the main source of oil growth, Schlumberger, which sold its U.S. hydraulic fracturing business last year, said international activity was taking over.

“With the gradual return of demand for oil, we expect activity in North America to stabilize at sustaining levels of production, while international activity is expected to accelerate through the end of the year. year 2021 and beyond, “said Le Peuch.

The company expected double-digit growth in its international revenue in the second half of 2021, he added.

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Felix J. Dixon