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Schlumberger boosted by booming U.S. shale fields

Texas oil fields are booming again and proving even more profitable than anticipated for energy services companies.

But the U.S. oil production rebound – which many analysts worry has come too fast, too soon – threatens to keep crude prices mired in a state of middling purgatory, the chief executive of the world’s largest energy services company said Friday.

Schlumberger, which operates out of Houston, reported Friday that its onshore North American revenues jumped 42 percent from the first quarter of the year with every product line proving profitable, said Paal Kibsgaard, the company’s CEO. Schlumberger’s biggest boost came from a 68 percent jump in U.S. revenues from hydraulic fracturing as the industry heats back up.

Still, U.S. oil producers “have spooked the oil market investors into believing the fast barrels from U.S. land will flood the market and leave inventory levels elevated for the foreseeable future,” Kibsgaard said, adding that there’s “more uncertainty around the shape and timing of the global industry recovery.”

Concerns about increasing U.S. shale production has weighed on the market in recent months, holding down prices despite efforts by OPEC and its partners to cut their production by 1.8 million barrels a day through next year. Kibsgaard told analysts that he expects continued growth in the U.S. market in 2018, but maybe at a slower pace than this year’s rebound.

Jim Wicklund, an analyst at Credit Suisse in Dallas, said investors pushing producers to increase output for short-term gains could undercut the long-term prospects for a price recovery. “If these guys would pay attention, they’d have a better long-term industry, ” Wicklund said

James West, an analyst at investment bank Evercore ISI in New York, called it the “shell game of shale.”

The two-year oil bust sent crude prices plummeting from $100 oil down to a low of $26.21 a barrel in early 2016. Prices have since rebounded, but after rising to nearly $55 a barrel in February, prices have fallen over concerns that there is still too much oil on the market.

Crude settled Friday at $45.77 a barrel, down $1.15.

‘Incredibly strong’

Schlumberger, the first major energy services company to report its earnings, touted second-quarter revenues of $7.46 billion that represent an 8 percent gain from the first quarter and a 4 percent improvement over the same time period last year. Its rival, Halliburton of Houston, reports Monday.

Schlumberger posted a net loss of $74 million because of a one-time charges totalling $510 million. The charges are primarily from Venezuela’s inability to pay Schlumberger what it owes the company.

Bill Herbert, a senior energy analyst at Piper Jaffray & Co. in Houston, described Schlumberger’s results as “incredibly strong,” including better-than-anticipated gains internationally.

Schlumberger announced late Thursday it’s doubling down on its Russian investments by acquiring a majority ownership stake in the Eurasia Drilling Co. Schlumberger started a strategic alliance with the Russian oilfield services giant in 2011, and planned in 2015 to buy a 45.6 percent stake in Eurasia for $1.7 billion. But that deal fell through amid Russian regulatory concerns.

Joint venture

The Eurasia management then took the company private. Schlumberger plans to acquire a 51 percent stake in Eurasia now but isn’t releasing details, including an acquisition price.

Schlumberger also is hoping to boost its U.S. fracking fleet before the end of the year by finalizing the deal for its planned joint venture with smaller services rival Weatherford International. Schlumberger would own 70 percent of the joint venture.

SOURCE: Houston Chronicle 

About Oklahoma Minerals Founder GIB KNIGHT

Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of OklahomaMinerals.com, an online resource designed for mineral owners in Oklahoma.

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