Page 10 - NorthAmOil Week 42

NorthAmOil PERFORMANCE NorthAmOil
Schlumberger,
Halliburton report
losses as shale
slowdown bites
NORTH AMERICA
LEADING oilfield services firms Schlumberger and Halliburton have both reported declines in quarterly profits, with performance taking a hit in part as a result of the slowdown in shale drilling.
Schlumberger reported a net loss of $11.4bn, or $8.22 per share, for the third quarter of 2019. This marked a significant drop from a net profit of $644mn, or $0.46 per share, in the same quar- ter of 2018. The loss was largely the result of a $12.7bn impairment charge, related to Schlum- berger’s 2010 takeover of oilfield service provider Smith International and the 2016 acquisition of Cameron International. Over $8.8bn of the charge was attributed to write-downs in the value of business units formed by the acquisi- tions of Smith and Cameron.
A further $1.6bn in losses was attributed to write-downs in value of Schlumberger’s North American hydraulic fracturing business, which has been hit by weaker demand amid lower crude oil prices and tightening customer budgets.
“This quarter’s results reflected a macro envi- ronment of slowing production growth rate in North America land as operators maintained capital discipline, reducing drilling and frack activity,” Schlumberger’s CEO, Olivier Le Peuch, said in a statement.
Le Peuch, who took over from Paal Kibsgaard in August, warned previously that his company would record a sizeable non-cash charge in the third quarter. He has outlined plans to boost company performance by exiting unprofitable businesses and restructuring some Schlum- berger units.
The company recorded adjusted earnings of $0.43 per share, which the Financial Times said topped the median forecast among Wall Street analysts. The firm’s third-quarter revenue was $8.5bn, flat from a year ago but estimated to be about $40m above analysts’ expectations.
Halliburton, meanwhile, announced net income of $295mn, or $0.34 per share, for the third quarter, marking a sequential increase but a drop from net income of $435mn, or $0.50 per share, in the third quarter of 2018.
This result was in line with analyst expec- tations, but the Houston Chronicle noted that Halliburton’s quarterly revenue, at nearly
$5.6bn, came in below Wall Street expectations of $5.8bn. It also marked a decrease from $6.2bn of revenue recorded in the third quarter of 2018.
The decline in revenue can be attributed pri- marily to a slowdown in North America. Halli- burton’s revenue grew in Latin America, Europe, Africa, the Middle East and Asia during the third quarter, while in North America it declined by $790mn year on year.
On an earnings call with investors, Hall- iburton’s CEO, Jeff Miller, said the company had stacked fracking crews and was deploying cost-cutting technology.
“In the third quarter, we stacked more equip- ment than the previous six months combined,” Miller said. “While this impacts our revenue, we would rather err on the side of stacking than work for insufficient margins and wear out our equipment.”
While Schlumberger is the world’s largest oilfield services provider, Halliburton accounts for the biggest share of fracking services. Earlier this month Halliburton cut 650 jobs in North America, and it has said it will take steps over the next few quarters that it anticipates will lead to $300mn in annualised cost savings.
At the same time, the company has warned of further activity declines in North America, with fourth-quarter revenue for its fracking business forecast to decrease by low double digits.
“Feedback from our customers [leads] us to believe that the rig count and completions activ- ity may be lower than the fourth quarter of last year,” Miller said.
However, he added that Halliburton’s size and scale in North America allowed the company to “drive a sustainable model without sacrificing our leadership position”.
Oilfield service providers’ results are a sign of things to come as shale producers prepare to release their quarterly results over the com- ing weeks.™
Lower crude oil
prices and tightening customer budgets have hit demand for fracking services.
While Schlumberger is the world’s largest oilfield services provider, Halliburton accounts for the biggest share of fracking services.
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w w w . N E W S B A S E . c o m Week 42
22•October•2019