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Schlumberger Sees Ongoing ‘Resilient’ Upstream Growth in North America, Elsewhere
Constrained availability of oilfield services (OFS) supply capacity in North America, and increasingly internationally, rank among ongoing “tailwinds” for natural gas and oil prices, management at Schlumberger Ltd. said Friday.
The OFS giant sees “a decoupling of upstream spending from potential near-term demand volatility, resulting in resilient global oil and gas activity growth in 2022 and beyond,” Schlumberger’s CEO Olivier Le Peuch told analysts during a call to discuss earnings for the second quarter.
He said that “energy security and urgency to establish more diverse and reliable sources of oil and gas supply have become increasingly apparent.” In addition, he said the ongoing Russia-Ukraine conflict and “periodic supply disruptions in certain regions” are exacerbating the situation.
Citing recent OPEC and International Energy Agency demand projections through 2023, Le Peuch said “very tight” supply and excess spare capacity continue “to suggest a call on supply from North America and a more significant call on supply from the international basins.”
Additionally, he said that a mix of “energy security, favorable break-even prices, and the urgency to grow long-term oil and gas production capacity” would help to sustain “strong…spending growth” among exploration and production (E&P) companies.
By laying out an extended upstream upcycle scenario, Le Peuch echoed comments expressed earlier in the week by OFS peers Halliburton Co. and Baker Hughes Co, setting a tone for the 2Q22 earnings season.
The bullish E&P framework “will support both revenue growth and margin expansion, more than offsetting inflation,” he said.
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Given the optimism, management raised Schlumberger’s 2022 year/year revenue growth outlook to a “high-teens” percentage, equating to “at least $27 billion” for full-year revenue.
“Looking ahead, the second half of the year continues to shape up very well as highlighted in our revised expectations for the full year, encompassing all phases of oil and gas development and all operating environments – from high-volume onshore to deepwater offshore – and firmly establishing digital, decarbonization, and improved pricing as defining characteristics of this upcycle,” said Le Peuch.
Total revenue for 2Q2022 was $6.8 billion, up 20% year/year from $5.6 billion.
On a geographic basis, 2Q2022 North American revenue was $1.5 billion, up 42% year/year from $1.1 billion. Internationally, revenue grew 15% year/year from $4.5 billion in 2Q2021 to $5.2 billion in 2Q2022.
Each Schlumberger division also showed double-digit percentage revenue growth on an annual basis that outpaced rig count growth in North America and internationally.
Well Construction garnered $2.7 billion in revenue for 2Q2022, up 27% from $2.1 billion in 2Q2021. Within the division, Schlumberger reported “higher land and offshore drilling activity” quarter/quarter in North America and internationally, a seasonal Northern Hemisphere rebound, and improved pricing.
Beyond the seasonal rebound, management said “improved pricing and new projects” drove international growth in Well Construction – especially in Argentina, Guyana, and Sub-Sahara Africa. Another driver was “higher drilling activity” in Australia, Southeast Asia, and the Middle East, particularly Qatar and Saudi Arabia, Schlumberger reported.
Production Systems revenue totaled $1.9 billion in 2Q2022, representing a 13% year/year increase from $1.7 billion.
Schlumberger noted that Production Systems’ supply chain and logistics constraints have eased sequentially, enabling more product deliveries – primarily internationally. In North America, primarily onshore U.S, the OFS giant noted increased surface production system sales.
It also reported higher subsea production system sales in Latin America. Midstream and subsea production system deliveries also rose in Europe, the Commonwealth of Independent States (CIS), and Africa, management said.
Taking in 19% higher revenue year/year was Reservoir Performance, with $1.3 billion for 2Q2022 compared to $1.1 billion in 2Q2021. Outside of Russia and Central Asia, the division experiences stronger demand globally – on land and offshore – for evaluation, intervention, and stimulation services, said management.
Digital & Integration’s $955 million in 2Q2022 revenue marked a 17% jump year/year from $817 million. Management highlighted the division’s higher exploration data licensing sales in the U.S. Gulf of Mexico and improved profitability for Asset Performance Solutions projects, specifically in Canada.
Schlumberger reported 2Q2022 net income of $970 million (67 cents/share), up year/year from $443 million (30 cents).
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