Schlumberger Boosted by Shale, Oil on the Up (Update)
(Updates with Baker Hughes GE results)
US oilfield services giant Schlumberger sees the oil price moving up as geopolitical risk premium replaces the oversupply discount, it said October 20, reporting a 6% rise in Q3 revenue and an 11% rise in pretax operating profit, compared with Q2 2017, taking pretax profits to $1.059bn.
Net profits were $545mn, compared with a Q2 net loss of $74mn.
CEO Paal Kibsgaard said: “Activity growth in the third quarter was again led by our North America Land GeoMarket, where we continued to gain market share in both hydraulic fracturing and drilling services despite the decelerating rig count growth. We also saw strong sequential activity growth in Russia, the North Sea, and Asia, while our activity in the rest of the world was largely flat compared with the second quarter. Revenue growth was driven by its production group, which increased 15% sequentially from continued share gains in the hydraulic fracturing market in North America land as well as from increased unconventional resources project activity in the Middle East."
Schlumberger has been working with UK major BP on developing the Khazzan tight gas field in Oman, which flowed first gas late last month.
US Gulf, Europe, Africa outlook weak
“North America revenue increased 18% as we continued the high redeployment rate of our spare hydraulic fracturing capacity. North America land revenue grew 23% sequentially, significantly outpacing the 12% increase in rig count, with hydraulic fracturing revenue growing 42%. Over the past six months, we have more than doubled the number of active fracturing fleets in North America land and have now redeployed almost all available capacity. This generated transitory costs and inefficiencies across field operations and in our distribution network, which will be addressed during the fourth quarter. In the US Gulf of Mexico, activity continued to weaken in the third quarter, and the outlook remains bleak for this region based on current customer plans.
Elsewhere, revenue was essentially flat with the 2Q, it said, and it sees the oil market now in balance, hence the rise in oil prices over the past month and the likelihood of more investment coming up. Upstream companies are now focusing on the need to operate within cash flow rather than pursue production growth, it said, also viewing as a possibility of the Opec/Russia oil production regime extending beyond the nine-month agreement. Also, investment in the production base outside North America, Opec Middle East Gulf, and Russia all "remain at unprecedented low levels, raising the likelihood of a medium-term global supply challenge, and increasing the urgency for higher investment. While there is still some level of uncertainty around the exact timing of this industry recovery, we see a number of market factors and data points now emerging that make us increasingly positive and optimistic about the outlook for our global business," it said.
In recent years, the geopolitical risk premium was replaced by an oversupply discount. But "given the visible tightening of the supply and demand balance and the current geopolitical tensions in many of the world’s key oil producing regions, a geopolitical risk premium may again become a significant factor," it said.
Rebound for BHGE
Baker Hughes (BHGE) also improved with Q3 adjusted operating income of $240mn, up 105% on Q2, although down 13% year on year. Operating loss of $122mn in Q3 was 17% less than in Q2 and decreased 22% year-over-year on a combined business basis.
It was the first set of quarterly results since GE's merger of its oil & gas business with Baker Hughes was completed July 3. "I am now more convinced than ever that we combined the right companies at the right time,” said BHGE's CEO Lorenzo Simonelli.
Its oilfield equipment business received a major contract to provide engineering, fabrication and construction of a subsea construction system and to support the installation, commissioning and start-up operations for phase two of Egypt's Zohr giant gas field.
“In our turbo-machinery & process solutions segment, the LNG market continues to be over-supplied in the near term with gas prices pressured in most markets. [However] the long-term value proposition for LNG remains positive and we have an industry-leading portfolio in the segment with strong manufacturing and service capabilities," he added. The segment received orders from Coral South FLNG and on software services from Nigeria LNG.
William Powell