Schlumberger Ltd., the world’s largest oilfield services company, posted solid double-digit revenue growth and sequential margin expansion in North America, both onshore and offshore, in the final three months of 2020.
During a conference call on Friday morning in Houston, CEO Olivier Le Peuch said the overall market position improved in 2020, despite the pressure on energy consumption wrought by the pandemic.
The decision by the Organization of the Petroleum Exporting Countries and its allies to throttle back production into the spring is “supporting oil prices well above crisis levels, while demand is projected to build up throughout the year,” the CEO said of the near-term outlook.
“Absent of a new setback in the pandemic control and economic recovery, we see constructive macro drivers developing through the course of the year.” The “ongoing Covid-19 vaccine rollout, and multinational economic stimulus actions” are “driving optimism for an oil demand recovery throughout 2021.
“We believe this sets the stage for oil demand to recover to 2019 levels no later than 2023, or earlier as per recent industry analysts’ reports, reinforcing a multi-year cycle recovery as the global economy strengthens. Absent a setback in these macro assumptions, this will translate to meaningful activity increases both in North America and internationally.”
North American MoJo
North American “spending and activity momentum will continue in the first half of 2021 toward maintenance levels, albeit moderated by capital discipline and industry consolidation,” said the CEO.
Schlumberger exited 2020 “with quarterly margins reset to 2019 levels as the upcycle begins,” Le Peuch said. “On the back of our high-graded and restructured business portfolio, we see a clear path to achieve double-digit margins in North America and visible international margin improvement in 2021.”
North American well construction and surface systems growth during the final three months of 2020 “exceeded pressure pumping and outpaced rig count,” said the CEO. “This underscores the strength of our market position and breadth of services supporting shale activity…”
Still, U.S. production “will still be visibly below previous production levels, as continued capital discipline and the impacts of consolidation will cap the spending level, and rate of growth may slow in the second half due to budget exhaustion.”
North American growth in 2021 is forecast “to be in the midteens when contrasted with the run-rate of the second half of 2020…In this scenario, and as the market starts to rebalance, the call on international supply will increase, and we do expect to see an acceleration of the international recovery, both short- and long-cycle, after the seasonal dip in the first quarter.”
Momentum in land activity is coming in part through a partnership with Liberty Oilfield Services Inc., which has taken over OneStim, Schlumberger’s massive U.S. and Canada onshore hydraulic fracturing business. In exchange, Schlumberger nabbed a 37% stake in the Denver-based company.
Schlumberger now has put 2020 in the rearview mirror and is shifting into higher gear.
In leveraging the company’s revamped Basin and Division structure, “we are fully set to capitalize on the growth drivers of the future of our industry, particularly as we accelerate our digital growth ambition and lead in the production and recovery market.”
New Energy Growth
To meet a long-term goal to “bring lower carbon and carbon-neutral energy sources and technology to market, we are visibly expanding our New Energy portfolio, to contribute to the transformation of a more resilient, sustainable and investable energy services industry.”
The “digital transformation” of operations for customers is “imperative” to the makeover, and it works hand-in-hand with the “mandate for sustainable and lower carbon operations,” the CEO said. “Digital was the most resilient of our businesses during 2020, only second to subsea long-cycle, and is set to initiate an accretive growth cycle from 2021.”
The New Energy portfolio includes ventures in hydrogen and carbon capture utilization (CCUS) and storage, as well as lithium, geothermal and geo-energy. The No 2 oilfield services operator, Baker Hughes Co., also highlighted CCUS and hydrogen ventures during its 4Q2020 call on Thursday.
Le Peuch said the New Energy venture was “an essential step in our clear ambition to position Schlumberger at the forefront of new and sustainable energy technology in the coming years.”
Last year, Schlumberger also accelerated ways to decarbonize internal and customer operations, reinforcing a commitment to improve environmental, social and governance (ESG) performance.
As part of the ESG initiatives, Schlumberger over one year’s time delivered a 15% reduction in internal Scope 1 and 2 greenhouse gas emissions, setting a path to a stated 2025 emissions reduction goal, Le Peuch said.
Scope 1 covers direct emissions from owned/controlled sources, while Scope 2 covers indirect emissions from purchased power from electricity, steam, heating and cooling. (Scope 3 emissions cover indirect emissions in a company’s value chain.)
Net income rose to $374 million (27 cents/share) in 4Q2020, up from year-ago profits of $333 million (24 cents). Schlumberger reported a net loss of $10.49 billion in 2020, versus a 2019 loss of $10.11 billion.
Revenue in 4Q2020 declined 33% year/year but was up 5% sequentially to $5.5 billion, equally driven by North America and international businesses. Quarterly revenue was down in all of the divisions compared with 4Q2019, however. Well Construction revenue dipped 38% to $1.87 billion, and Production Systems was off 23% to $1.65 billion. Reservoir Performance revenue dipped 41% to $1.25 billion, while Digital and Integration fell 25% to $833 million.
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