Oilfield-Contractor Profits Seen Falling on Drilling Slowdown

o0qy{1n]k)e374cdp3lrud7f_media_dl_1.png Baker Hughes Co.

Article content

(Bloomberg) — The world’s biggest oilfield-service companies are expected to post the steepest profit declines in roughly four years as shale drilling slows.

Article content

SLB is seen reporting a 14% drop in per-share profit when it kicks off the sector’s earnings season on Friday, which would be the biggest falloff since early 2021. 

Article content

Article content

Halliburton Co. and Baker Hughes Co. are expected to follow next week with 30% and 1.8% drops, respectively. For Halliburton, a major player in the global fracking market, it would be the worst decline since 2021; Baker Hughes hasn’t reported a decline since the depths of the pandemic in 2020. 

Article content

Article content

US oil drilling has dropped 12% so far this year to the lowest since the autumn of 2021 amid choppy crude prices, economic uncertainty and concerns about the potential impact of President Donald Trump’s trade measures.  

Article content

Article content

US government forecasters already are trimming domestic crude-production estimates for this year. Chevron Corp. is idling rigs in the Permian Basin and reducing spending in a bid to shift from “growth to cash generation,” Bruce Niemeyer, president of the company’s shale business, said in an interview this week.

Article content

Analysts and investors will be listening closely to SLB’s quarterly conference call Friday for details on how much US drilling activity has slowed and where new opportunities may lie. 

Article content

The company and its competitors have been broadening product lines and expertise to accommodate surging demand for things like natural gas turbines to supply electricity to oilfield operations and data centers. 

Article content

Nevertheless, investors have been punishing the sector, sending a key index of oilfield servicers down 35% in the past year even as the broader S&P 500 climbed.

Article content

Article content

“There is this new breed of oilfield-service line that’s ‘power as a service,’” said Jeff Krimmel, owner of energy consulting firm Krimmel Strategy Group. “It’s an interesting kind of subset of the broader power conversation, that there’s so much power demand coming online.”

Article content

Baker Hughes and Liberty Energy Inc., in particular, have stepped up their power-service business lines with products like mobile generation and natural gas turbines, Stifel Nicolaus Co. analyst Stephen Gengaro wrote in a note to clients. 

Article content

Guidance for the second half of this year probably will be lowered among oilfield contractors, dragging down 2026 expectations as well, Barclays Capital Inc. analyst David Anderson wrote in a note.

Article content

“I’m very curious when I listen to this round of earnings calls from all the big oilfield-services companies to hear how they are positioning themselves for this lower-for-longer activity environment,” Krimmel said.

Article content

—With assistance from David Wethe and Kevin Crowley.

Article content