Page 11 - NorthAmOil Week 16

NorthAmOil PERFORMANCE NorthAmOil
Leading oilfield
services firms
report losses
GLOBAL
THE three leading oilfield service providers – Schlumberger, Halliburton and Baker Hughes – all reported quarterly losses in the past week. The three companies and their smaller peers stand to be battered further by a major downturn in oilfield activity as the industry grapples with ever lower crude prices and tanking demand.
Schlumberger
Schlumberger, the world’s largest oilfield service firm, reported a $7.4bn loss for the first quarter of 2020, compared with a $421mn profit in the same quarter of 2019. The loss was attributed to $8.5bn in charges as Schlumberger’s customers accelerated cuts in capital spending in response to the collapse in oil prices.
The company expects global spending to fall roughly 20% in 2020, with North America being hit particularly hard and seeing a 40% drop. Indeed, Schlumberger reported a 17% drop in North American revenue in the first quar- ter compared with a 2% year-on-year increase in revenue from the company’s international business. However, international markets are not immune to ongoing oil price volatility, and analysts from Tudor, Pickering, Holt & Co. (TPH) have warned that national oil compa- nies (NOCs) and other players will continue to reduce their spending too.
Schlumberger has cut its 2020 capital invest- ment budget by over 30% to 1.8bn, as well as reducing its North American workforce by 1,500 in response to the downturn.
The second quarter of this year is likely to be the “most uncertain and disruptive quarter that the industry has ever seen”, Schlumberger’s CEO, Olivier Le Peuch, warned during the company’s earnings call last week.
Halliburton
Halliburton, for its part, reported a $1bn first-quarter loss, compared with net income of $152mn in the same quarter of 2019. Like Schlumberger, Halliburton reported charges that affected its first-quarter performance. The company booked $1.1bn in pre-tax impairments and other charges, which were mostly related to the value of pressure pumping equipment.
Other parallels with Schlumberger included a drop in North American revenue, while inter- national revenue rose. Halliburton said its North American revenue in the first quarter contracted by 25% to $2.46bn from $3.28bn a year ago. Meanwhile, the company’s international revenue
increased by 5% y/y to $2.58bn. This was pri- marily attributed to increased well construction activity in the North Sea and Russia, as well as higher activity across multiple product lines in the United Arab Emirates (UAE), Mexico, Indo- nesia and Malaysia.
Halliburton announced that it was cutting its capital expenditures for this year by $800mn, or around 50%, and reducing overheads and other costs by roughly $1bn. The company has laid off hundreds of workers, and furloughed thousands more.
The firm has warned that it faces disruptions as a result of border closures and travel restric- tions relating to the coronavirus (COVID-19) pandemic. These have prevented the company from accessing certain operations, it said.
Baker Hughes
This week, Baker Hughes reported a $10.2bn loss for the first quarter of 2020, compared with net income of $32mn a year ago, with company revenue falling slightly more than expected to $5.43bn. Refinitv Eikon data cited by Reu- ters showed that analysts had expected Baker Hughes’ revenue to come in at $5.63bn on average.
The company said last week that it would take a $1.5bn charge in the first quarter, as well as a $15bn goodwill impairment charge as it revised the long-term prospects for its oilfield and equip- ment unit.
Baker Hughes has cut its 2020 budget by over 20% y/y and is restructuring its operations in response to the downturn. The company is accelerating the shut-down of non-core product lines, including its North American full-service drilling and completions fluids business, and is seeking to exit others.
The firm anticipates that spending in North America will contract by at least 50% this year, in line with expectations set out by Halliburton.™
North American operations are being
hit particularly hard as shale drillers scale back activity.
The three companies and their smaller peers stand to be battered further by a major downturn in oilfield activity.
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