The fossil fuel industry is built on a continuum that affects each other, and in light of the decline in shale oil exploration activities in America, the profits of oilfield services companies are in the wind.
And a number of major global field services companies confirmed that drilling and hydraulic fracturing equipment faced a decrease in demand during the second quarter of this year (2023), according to a report published by the Financial Times (Financial Times).Financial Times).
The decline in the performance of companies providing oilfield services in America reflects the turmoil in the energy sector in states extending from West Texas to North Dakota, according to what was followed by the specialized energy platform.
“Limited” production despite the high
Forecasts indicate that US oil production may record an estimated growth rate of about 200,000 barrels per day only during the next 12 months, and although this rate is still high; It is down from levels between 2018 and 2019 of two million barrels per day.
The slowdown in shale oil exploration in America coincided with strict measures and restrictions imposed on the operators who took responsibility for the high drilling rate during the past two years. The most prominent of these restrictions were the harsh systems of capital controls and returns to shareholders.
Halliburton workers at a site – photo courtesy of the Houston Chronicle
Producers pledged to adhere to these controls even if oil prices rose again. This raises doubts about the possibility of restoring the “shale oil revolution” and bringing it back into the equation of the US energy sector once again.
It appears that the drop in oil prices compared to the same time in 2022 also affected the gains of the service field companies involved in providing shale oil exploration equipment in America and the rest of the field services. Brent crude prices are below $80 per barrel, down by more than a third of last year’s prices.
The same thing happened with US gas prices. It has fallen by more than half, from $6 per BTU to just under $3.
Field service companies
Field services are a mirror of the oil and gas industry, but the surprise was in the decline in rigs and fracturing equipment starting from the end of last year (2022) and worsening during the second quarter.
The move forward of the plans of oil field services companies depends on the rate of international demand, as well as the demand for marine activity as an attempt to compensate for the decline in the rate of exploration for shale oil in America.
Groups of the largest field service providers in the world revealed a decrease in their gains, affected by the decline in drilling rates. This put pressure on these companies due to the decline in demand, especially since the scope of their work includes drilling wells and other services.
The chart below – prepared by the specialized energy platform – monitors the variation in US oil production from 2019 to the current year (2023):
The number of rigs and equipment for drilling for shale oil in America decreased, while 3 of the largest field service providers in the world revealed a decline in their activity in the northern states during the second quarter of this year (from April to the end of June).
Among the oilfield services giants affected by the decline in shale oil exploration rates in America: (SLB Group (formerly Schlumberger), Baker Hughes, and Halliburton).
A setback for corporate ambition
Oilfield services giants may be forced to change their expansion plans if shale oil exploration activities continue to decline in America, and fracturing (hydraulic) rates decrease.
Among those affected was the “Liberty Energy” company, and its CEO, “Chris Wright”, stated that it is possible that his company will reduce its fleet of fracking equipment if the exploration activity continues to decline during the second half of the current year (2023).
He said that if the company receives requests from its customers to make additional discounts on equipment and drilling platforms; It may shrink its fleet, especially after the decline in the second quarter of the year, despite its distinction in crushing and rock crushing equipment.
Formerly Baker Hughes and SLB Schlumberger facilities – Photo courtesy of The Street
Not only did this “restrain” the companies’ expansion plans, but it also extended to revenues, and despite the strong performance of the Gulf of Mexico region; The revenues of Halliburton were affected by 2% due to the decline in fracking activities (hydraulic).
And the company’s president, “Jeff Miller,” expected the continuation of the weak demand for oil field services during the second half of this year, in light of the decline in drilling and exploration activities.
Miller relied on the expected rise in gas prices in the coming recent times, which casts a shadow over the future of the entire industry next year (2024).
Cautious optimism
The decline in shale oil exploration activities in America has frustrated Halliburton and Liberty Energy, but Baker Hughes and formerly SLB Schlumberger are resisting this scenario.
In turn, the CEO of Baker Hughes, “Lorenzo Simonelli”, expressed optimism about what he described as the “stability” of the sector, and the resumption of exploration activities again at a pace that prompted customers to request discounts on the most requested services, including pressure pumps.
The CEO of SLB, “formerly Schlumberger”, Olivier Le Bosch, downplayed the decline in shale oil exploration activities in America, pointing out that his company’s “globality” avoided local and regional fluctuations, although activities in North America constitute 20% of the company’s business.
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2023-07-23 15:25:58
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