Schlumberger Expects Slowdown in U.S. Drilling
By Ryan Dezember
The world's largest oil-field services company forecasts a
slowdown in U.S. drilling activity due to weak commodity prices and
exhausted budgets at the exploration and production companies for
which it works.
Schlumberger Ltd., which helps energy producers find and extract
oil and gas, said Friday that it anticipates activity in North
America's shale fields to decline more than usual in winter, even
as it expects strong demand in international and offshore drilling
regions to continue.
The quarterly results of Schlumberger, which reported
third-quarter earnings on Friday, serve as a bellwether for the
energy business given its reach across regions and insight into
drillers' plans. Halliburton Co., which is even more focused on the
U.S. than Schlumberger, is scheduled to report its third-quarter
results on Monday.
Schlumberger's North American revenue declined 11% from the same
period a year earlier, while climbing 8% in international markets.
The company took a $12.7 billion write-off during the quarter.
Olivier Le Peuch, Schlumberger's chief executive, said the
results "reflected a macro environment of slowing production growth
rate in North America land as operators maintained capital
discipline, reducing drilling and frack activity."
The hydraulic-fracturing business, which cracks open deeply
buried shale formations to release oil and gas, has suffered from
customers that have deferred or canceled drilling plans due to
budget constraints, Mr. Le Peuch said. The outlook is further
clouded by uncertainty over future oil demand "in a climate where
trade concerns are seen as challenging global economic growth," he
West Texas Intermediate, the U.S. price gauge, was down 1% to
$53.39 a barrel on Friday. Brent crude, the international
benchmark, fell 1.3% to $59.12.
Aside from a short-lived spike last month following attacks on
Saudi oil-production facilities, U.S. oil prices have traded in a
range between $50 and $60 a barrel since May.
That has not been high enough to convince energy producers -- or
their shareholders -- to boost drilling activity. The number of
rigs drilling in the U.S. has declined roughly 20% over the last
year, according to Baker Hughes, another Schlumberger
Despite the slowdown in drilling activity, the U.S. Energy
Information Administration on Thursday reported a big rise in U.S.
crude inventories. That was due in part to a seasonal slowdown at
refineries, which turn crude into products like gasoline and jet
Meanwhile, soaring shipping costs could cause U.S. stockpiles to
swell further as crude exports dwindle, adding downward pressure to
domestic oil prices. Asian buyers turned to the U.S. for supplies
following the attacks in Saudi Arabia. But the combination of
sanctions against Chinese shippers and tankers going off the market
while they are retrofitted to comply with emissions standards that
go into effect in the new year has boosted the price of U.S.
(END) Dow Jones Newswires
October 18, 2019 13:28 ET (17:28 GMT)
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