Oilfield services operators last week reported stronger sequential earnings in 1Q2010 from the last three months of 2009 because of a boost in U.S. onshore spending, but with North American natural gas prices failing to show much strength, the outlook for the second half of this year is uncertain, CEOs of Halliburton, Nabors Industries Ltd. and Schlumberger Ltd. said last week.

“We saw a sharp contrast between our North American and international markets” in the first three months of 2010, Halliburton CEO Dave Lesar said during a conference call with energy analysts. “We had a 19% increase in our North American business, offset by contraction in international operations…We are seeing a rebound in U.S. drilling activity, combined with a secular trend with more intensive work in meaningful plays. This is most evident in stimulation [to hydraulically fracture wells], which are at levels we’ve not seen since 2008. That’s led to improved pricing across most of our service lines.”

The rising activity levels are “most evident in those service-intensive plays,” he said, which include the Bakken Shale, an unconventional oil/liquids play in the Williston Basin, as well as the dry gas Haynesville and Woodford shale plays, and the Eagle Ford wet gas shale in South Texas. In those plays, Lesar said, “the demand for equipment is far outstripping capacity.”

Halliburton now is running 24-hour-a-day operations in the Haynesville and Bakken plays, and nearly all-day operations in “other gas basins in the Rockies and Eagle Ford,” Lesar added. The increased work has led the company to bump up its U.S. workforce by about 2%, or 1,200 people, since the beginning of the year.

“The shift toward the major shales has continued unabated,” said the CEO. However, Lesar said North America’s natural gas “fundamentals…remain a risk to continued rig count growth in the near term,” but “operator hedging positions, the need to drill to hold acreage and the shift to liquids-rich reservoirs should moderate possible activity declines and may result in a range-bound rig count for a period of time.

“We believe a sustainable recovery will only occur with an increase in natural gas demand,” said the Halliburton chief.

Nabors Industries Ltd. CEO Gene Isenberg said his company’s “operating income in the Lower 48 was frankly a pleasant surprise…Quarter to quarter [from 4Q2009 to 1Q2010], we went from $49 million to $60 million…Today I think we have 173 rigs working, which is 14 more than we averaged in the quarter.

“While activity in the predominantly gas shales is off, leveling off and might even decline, we don’t know, we continue to see a ramp-up in coal-directed areas like the Bakken [shale] in North Dakota and Wolfberry area from the basin,” said Isenberg. “The shale is way more important to us. That kind of shale, the oil shales are more important. and the oily or liquid-heavy, what had been considered the gas shales, they’re even more important.”

Isenberg said he was “obviously aware of the North American gas prices. I firmly believe that today’s prices are not reflective of costs to replace the commodity in the long term. Or even the intermediate term. I remain bullish about gas and its long-term impact on Nabors…We’re adaptable. We’re going to go to the liquids-rich gas plays…

“But obviously, our outlook is materially different. There is a two-year average price [for natural gas] of $6.50 or $6.00 or higher…”

Schlumberger, meanwhile, said Friday that a “strong performance” in North America and overseas failed to offset declines in product and software sales. Its 1Q2010 earnings were down 28% from the year-ago period.

CEO Andrew Gould said he thought the first three months of this year represented a “bottom” for margins, and they “are now likely to resume a positive trend.”

North American revenue slid 13% in the first three months of this year from a year earlier, but revenue jumped 18% sequentially. North American earnings were down by almost half (49%) from 1Q2009. Sequentially, all North American units recorded revenue growth, Gould noted.

However, the outlook this year remains cloudy because of low gas prices, said the CEO.

“In North America, commitment drilling to hold leases, as well as interest in domestic oil plays, should sustain current activity levels in the U.S. through the second quarter while Canada will experience the normal spring break-up,” said Gould. “Beyond that, the picture is less clear as natural gas prices and the fundamentals of the natural gas market remain uncertain.”

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