Schlumberger dusts off mothballed equipment
Houston, 21 April (Argus) — Schlumberger said it wants to redeploy its idled North American equipment more quickly to take advantage of rising rates.
The oilfield services industry bore the brunt of the prolonged market downturn, cutting tens of thousands of jobs and offering deep discounts on charges for its equipment and rigs to producers to retain their share in a shrinking market. With the US drilling rig count now more than doubling from its lowest in at least three decades touched last year, Schlumberger and its peers are gradually beginning to start charging more.
The better business environment led to 16pc growth in revenue in the first quarter from the previous three months in North America for the world's biggest oilfield services provider as operating margins recovered by 66pc in services including hydraulic fracturing in US onshore. But its overseas business, particularly in China, Russia onshore and the North Sea, remained weak, resulting in a 7pc drop in international revenue from the earlier three months as they cut back spending.
Schlumberger cautioned that the continued underinvestment globally risks creating a supply deficit in coming years as producers are not doing enough to find and develop new sources of oil and gas. Depletion of proven developed reserves is "rapidly accelerating" in several key non-Opec countries, chief executive Paal Kibsgaard said.
"The continuing underinvestment in new supply is increasing the likelihood of a medium-term supply deficit as reservoirs are produced but reserves are not replaced in sufficient volumes," he said. "The market continues to focus on headline decline numbers, suggesting that production is holding up well."
As producers' cash flows continue to remain under pressure, with oil prices hovering around $50/bl, Schlumberger said it will continue to improve drilling technology and efficiency. It will work jointly with producers to keep costs under control, "tailoring our offering and performance to the prevailing market conditions," Kibsgaard said. The company will also look for further acquisitions or partnership with other service providers to add more services.
During the quarter, it acquired a minority interest in Borr Drilling, a Norwegian rig contractor, for $221mn, to offer more offshore jack-up market services. It also set up a joint venture with Weatherford to offer more completion products for the unconventional industry in North America.
Schlumberger had cut its staff strength to 95,000 by the end of 2015 from 120,000 in 2014. But it has about 100,000 now following a $14.8bn acquisition of a smaller rival Cameron last year.
First quarter profit fell by 44pc to $279mn compared with a profit of $501bn, but recovered from a loss of $204mn in the previous three months. Total revenue in the first quarter rose by 6pc from a year earlier to $6.89bn.