Oil field service firms are ready to announce the strongest third-quarter results in years as demand for equipment and services has surged despite supply chain snags and rising costs from inflation, according to analyst forecasts.
Halliburton (HAL.N), Schlumberger (SLB.N), and others have fought to regain pricing power after a 2016 price fall. The oil market crash during the pandemic in 2020 quenched hopes for a rebound.
The lack of spending on new equipment left the market for drilling and fracking tight in 2022 as oil prices rose and companies had no older gear left they could break apart for parts. Oil prices remain close to their highest levels in almost eight years, prompting more producer demand for services.
“Pricing is coming through,” said Evercore ISI oilfield services analyst James West. He and others project an increase from stronger international and offshore activity from deepwater projects in Brazil and Guyana.
Halliburton and Schlumberger did not instantly respond to requests for comment on the extent to which they have been able to hike prices. Baker Hughes refused to comment.
The international rig count surged to 879 in September, up from 787 a year earlier, according to Baker Hughes. In the United States, there were 295 hydraulic fracturing spreads operating in mid-October, up 27 from a year earlier, according to consultancy Primary Vision Network. That reflects a utilization rate of more than 90%, Primary Vision said.
Evercore’s West predicts Halliburton and Schlumberger will beat Wall Street consensus estimates, with Baker Hughes declaring in-line results after pre-announcing headwinds from currency conversion and LNG facilities that delayed service work.
Baker Hughes begins the sector’s earnings on Wednesday, followed by Schlumberger on Friday and Halliburton on Oct. 25.
Baker Hughes could report per-share earnings of 25 cents, up from 16 cents a year earlier, Halliburton a profit of 56 cents, from 28 cents a year earlier, and Schlumberger 55 cents, from 36 cents a year ago, according to IBES Refinitiv estimates for the three.
Buy Crypto NowAnalysts will try to find evidence that oilfield companies are restaffing “especially the frac side,” said Matt Hagerty, senior energy strategist at FactSet’s BTU Analytics. Firms have been cautious to buy new equipment after years of oversupply and investor demands for greater returns.
The Philadelphia Oil Service Index (.OSX) this summer reached its highest level since March 2020, trading at roughly $90, but has fallen to around $68.50 on fears of a recession. In 2014, the index was $311.
The oilfield sector has experienced capital constraints, “supply chain issues, workforce shortages, and inflation impacts,” said Leslie Beyer, CEO of the Energy Workforce & Technology Council, which represents oilfield service companies.
“It will take more than one year of positive earnings to be fully healthy,” said Beyer.
