Global Oil Industry Prepares for a Revival
July 20 2018 - 2:45PM
Dow Jones News
By Christopher M. Matthews
Oil producers are ordering more equipment and lining up drilling
rigs for later this year, according to top industry executives,
indications that international activity is picking up.
The chief executives of Schlumberger Ltd. and Baker Hughes,
owned in part by General Electric Co., said customers are moving
forward with large projects and even preparing to increase
exploration for future ones.
"The international recovery has finally started," Schlumberger
Chief Executive Paal Kibsgaard said during the company's earnings
call with analysts. "The backlog on integrated drilling projects is
the most we've ever seen."
Over the past year, global oil activity has divided into two
distinct stories. The U.S. has remained a bright spot for the oil
industry, as frackers have withstood sustained low oil prices
following a crash in 2014. Earlier this month, U.S. oil output hit
11 million barrels a day for the first time ever, according to
federal estimates. Outside of the U.S., major oil conglomerates and
national oil companies have pulled back production and stopped
investing in costly offshore projects.
Oil prices reached 3 1/2 -year highs earlier this year, as Brent
crude, the global benchmark, topped $80 a barrel. Prices have
fallen a bit in recent weeks following a June OPEC meeting at which
the cartel and Russia agreed to ramp up production by up to one
million barrels a day, but have stayed above $70 since April.
Baker Hughes CEO Lorenzo Simonelli said higher commodity prices
are creating a good climate for renewed investment in oil
production and exploration.
"People are starting to firm up their plans for next year and
you are starting to hear more about [spending] increases and
projects moving forward," Mr. Simonelli said.
The international rig count is flat so far this year, but that
may be starting to change. Mr. Kibsgaard said the company was
mobilizing 90 land rigs outside the U.S. jointly with third-party
drillers, which he called "unprecedented." In another sign of
global activity heating up, Baker Hughes said it had its largest
number of orders for oil-field equipment since 2015.
The uptick in activity comes as concerns over supply grow
because of instability at some of the world's biggest oil producers
and geopolitical concerns. There have been large supply outages in
Venezuela and Libya, and renewed U.S. sanctions pose a risk to
supply in Iran.
Amin Nasser, chief executive of the Saudi Arabian Oil Co.,
widely known as Saudi Aramco, has called on the industry to
increase spending on drilling, saying the industry lost $1 trillion
in investments during the downturn. Saudi officials have privately
worried the lack of investment could lead to rising prices that
creates a long-term decline in demand.
So far, renewed activity has focused primarily on onshore
projects, which are less expensive and faster to complete. But,
according Mr. Kibsgaard, offshore drilling companies have begun to
order equipment in anticipation of a revival in shallow water
projects. Deepwater projects, which are hugely expensive, have yet
to come back but will be needed to meet future demand, he said.
On Friday morning, Schlumberger reported revenues of $8.3
billion, up 11% since the same time last year. Its international
business's revenue fell 1.4% year-over-year to $5 billion, but rose
4% since the first quarter of 2018. Baker Hughes reported $5.5
billion in revenues, up 2% since last year. The company's
international revenue was $1.7 billion, up 8% from the first
quarter.
Write to Christopher M. Matthews at
christopher.matthews@wsj.com
(END) Dow Jones Newswires
July 20, 2018 14:30 ET (18:30 GMT)
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