Schlumberger Outlines Bleak Results, Brighter Future
Oilfield services giant Schlumberger sees a continuing tightening of oil supply and demand for the rest of this year, as it reported dismal first-quarter profits on April 22.
The company reported net income of $901mn, less than half the $2bn it made in Q1 2015.
Revenues were down 16% on Q4 2015, making it one of the steepest quarterly declines since the downturn began, it said. Global spending reductions in 2016 are almost at a quarter, corresponding to reductions between 40% to 50% in North America and around 20% internationally.
But CEO Paal Kibsgaard said demand growth forecasts remain steady, while Opec production levels have been largely flat since mid-2015. Production in North America continues to fall as the effects of decline become more pronounced, while mature non-Opec production is also declining in a number of regions.
Kibsgaard said: “In this environment, our overall outlook is for a tightening of the supply-demand balance to continue during the rest of the year. Although new exports from Iran and growing global oil inventories drove oil prices lower earlier in the quarter, prices have rebounded to around the $40/b level owing to underlying market trends, supply disruptions and talks about a production freeze.”
But the short-term outlook remains bleak, as first-quarter decline in global activity and rate of disruption “reached unprecedented levels as the industry displayed clear signs of operating in a full-scale cash crisis. Budgeted exploration and production spend fell again and substantially affected our operating results. This environment is expected to continue deteriorating over the coming quarter given the magnitude and erratic nature of the disruptions in activity.”
North American revenue fell by a quarter with a 31% drop in the US land rig count, representing a drop of 80% from the peak of October 2014.
The decline in international revenue was most pronounced in Europe, the former Soviet Union and Africa. Regional revenue of $1.7bn dropped 18% sequentially, mainly in Russia and central Asia thanks to the weak ruble and the seasonal winter slowdown. Severe weather, lower exploration and project completions in the North Sea and widespread project delays and job cancellations in Sub-Saharan Africa also contributed.
On March 24, 2016, Schlumberger announced the acquisition of UK firm Meta Downhole Limited, a UK-based engineering and service company and a week later it bought another UK firm, the consultancy Asset Development & Improvement.
On April 1, 2016, Schlumberger completed its merger with Cameron International Corporation. The merger creates technology-driven growth by integrating Schlumberger reservoir and well expertise with Cameron wellhead and surface equipment, flow control, and processing technology. Cameron's Q1 revenue was $1.6bn.
Bright spots
In Egypt Schlumberger won a $60mn, three-year contract from UK major BP for completions installation and commissioning services in the offshore West Nile Delta Taurus Libra Field. With production expected to begin in 2017, development drilling has begun in this program that includes 21 wells and is expected to produce 1.2bn ft³/d, or about a quarter of Egypt’s output.
In Libya, Mellitah Oil and Gas, a joint venture of Eni and Libyan state NOC, awarded it a 30-month contract for subsea landing string system services during phase two development of the Bahr Essalam gas-condensate field.
Offshore Mozambique, it has begun a prefunded 14,500-km2 survey with the Western Trident and WG Amundsen, the first time that IsoMetrix technology will be used simultaneously by two vessels working on the same project. The survey is expected to be completed in Q4 2016.
And new sub-surface technology deployed at Oman’s Khazzan tight gas field, operated by BP, has improved well completion efficiency and production, and brought significant cost savings.
William Powell