Service Companies Encouraged by Pickup in Business
After more than 3 years of painful cutbacks and retrenchment, the major oilfield service companies are seeing encouraging signs of business recovery. Schlumberger, Halliburton, and Baker Hughes, a GE Company (BHGE), have reported improved financial results for 2017 and the year’s fourth quarter and have expressed favorable outlooks for 2018.
The backdrop for their encouragement consists of an improving demand for oil, a growing global economy, market-balancing supply restrictions led by the Organization of Petroleum Exporting Countries (OPEC), expanding North America onshore activity, and signs of a rebound in upstream capital investment. While significant concerns remain, the service sector’s outlook is the most positive it has been in several years.
The latest results from the companies are discussed below.
Schlumberger revenue for 2017 of $30.44 billion was a 9% improvement on 2016 revenue of $27.81 billion, while quarterly revenue of $8.18 billion improved by 15% over fourth-quarter 2016 revenue of $7.1 billion. On a successive basis, fourth-quarter 2017 revenue improved by 3% over third-quarter revenue of $7.9 billion.
Schlumberger reported a net loss of more than $1.5 billion, or $1.08 per diluted share, for 2017 compared with a loss of more than $1.68 billion, or $1.24 per diluted share, a year earlier.
For the fourth quarter of 2017, Schlumberger lost more than $2.25 billion, or $1.63 per diluted share, compared with a loss of $204 million, or $0.15 per diluted share, in previous year’s quarter.
Excluding special charges and credits, Schlumberger posted a full-year adjusted income of $2.08 billion, or $1.50 per diluted share, compared with $1.55 billion, or $1.14 per diluted share, in 2016.
Adjusted income for the fourth quarter was $668 million, or $0.48 per diluted share, compared with $379 million, or $0.27 per diluted share, in the 2016 quarter and $581 million, or $0.39 per diluted share, in the third quarter of 2017. Fourth-quarter 2017 adjusted income per diluted share beat analysts’ expectations by $0.04.
Among the special charges Schlumberger took in the fourth quarter were a more than $1.09-billion restructuring charge for its seismic business and a $938-million write-down on its investment in Venezuela, which reflects the country’s recent economic and political developments.
In its earnings release, the company said it is leaving the land and marine seismic acquisition market and converting its WesternGeco product line to an asset-light business focused on multiclient, data processing, and interpretation services.
Schlumberger Chairman and CEO Paal Kibsgaard noted a favorable industry picture related to demand growth, the global economy, the impact of OPEC- and Russia-led supply restrictions, and the need to bolster future supply after several years of underinvestment.
“All together,” he said, “this means the oil market is now in balance and the previous oversupply discount is gradually being replaced by a market tightness premium, which makes us increasingly positive on the global outlook for our business.”
Halliburton reported 2017 revenue of $20.62 billion, an improvement of 30% over 2016 revenue of $15.89 billion and 4.8% higher than analyst expectations. Fourth-quarter revenue of $5.94 billion was up 48% from $4.02 billion in the previous year’s quarter and up 9% from third-quarter revenue of $5.44 billion. The latest quarterly revenue figure beat analyst expectations by 1.4%.
The company reported an operating income of $1.4 billion in 2017, compared with an operating loss of $6.8 billion in 2016. Excluding special items, 2017 adjusted operating income was $2.0 billion, a nearly threefold increase from $690 million a year earlier.
For the 2017 fourth quarter, Halliburton reported an operating income of $379 million, compared with income of $53 million in the same quarter a year ago and income of $634 million in the third quarter of 2017. Excluding special items, fourth-quarter 2017 adjusted operating income was $764 million.
The company posted a loss from continuing operations of $805 million, or $0.92 per diluted share, in the fourth quarter of 2017, compared with a loss of $149 million, or $0.17 per diluted share, in the same quarter a year ago and income of $365 million, or $0.42 per diluted share, in the third quarter of 2017.
Excluding charges related to United States tax reform and Venezuela receivables, Halliburton posted adjusted income from continuing operations of $462 million, or $0.53 per diluted share, in the most recent fourth quarter.
“Outstanding execution resulted in an excellent fourth quarter, and we are well positioned to take advantage of opportunities presented by a growing North America market and improving international outlook,” said Jeff Miller, Halliburton president and CEO. “I continue to believe we are on the path to normalized margins in North America in 2018.” The past 12 months were “a dynamic year for the oil and gas sector that marked another step on the road to recovery.”
BHGE delivered orders valued at $22.04 billion and posted revenue of $21.92 billion for 2017, compared with orders of $21.11 billion and revenue of $23.10 billion in 2016, which amounts year on year to a 4% increase in orders and a 5% decrease in revenue.
The company recorded a 2017 operating loss of $233 million vs. a loss of $1.27 billion a year ago, an 82% improvement. Excluding special items, adjusted operating income was $1.03 billion for the year just past vs. $611 million in 2016, a 69% improvement.
For the fourth quarter of 2017, BHGE delivered orders of $5.76 billion and posted revenue of $5.76 billion, compared with orders of $5.87 billion and revenue of $5.92 billion in the same quarter of 2016. The figures reflect a 2% decline in orders and a 3% decline in revenue.
On a sequential basis, the 2017 fourth-quarter orders represented a 1% increase from the $5.72 billion in orders delivered in last year’s third quarter, while 2017 fourth-quarter revenue represented a 7% increase from the $5.37 billion in revenue posted in the third quarter.
BHGE recorded an operating loss of $92 billion in the most recent quarter, vs. $22 million in the final quarter of 2016 and $122 million in the third quarter of 2017. Excluding special items, the company posted adjusted operating income of $303 million in the 2017 fourth quarter vs. $361 million in the same quarter of 2016 and $240 million in the 2017 third quarter.
While noting continuing weakness in the subsea sector, BHGE Chairman and CEO Lorenzo Simonelli was positive about other parts of the business.
“Overall, we continue to see improvement in activity as early indications of customer capital spending in 2018 are encouraging, particularly for our shorter cycle businesses” he said. “International activity is stabilizing, and we are seeing signs of activity increase both in the volume and size of tenders for new work as customers feel more confident about their operating costs and commodity price stability.”
Baker Hughes and GE Oil & Gas merged on 3 July 2017, and stated figures for BHGE are on a combined business basis that treats the companies as if they were merged for the specific reporting period.
Service Companies Encouraged by Pickup in Business
Joel Parshall, JPT Features Editor
30 January 2018
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09 July 2019