Optimism

Baker Hughes Inc. on Friday reported a 30% drop in first quarter profits, stung by weak North American drilling, but there is more optimism about the U.S. onshore rig count through the rest of the year, the management team said Friday. Schlumberger Ltd. also reported a drop in quarterly profits on declines in North America, and executives said the outlook this year for the United States and Canada remains uncertain.

Baker Hughes Inc. on Friday reported a 30% drop in first quarter profits, stung by weak North American drilling, but there is more optimism about the U.S. onshore rig count through the rest of the year, management said Friday. Schlumberger Ltd. also reported a drop in quarterly profits on declines in North America, and executives said the outlook this year for the United States and Canada remains uncertain.

The recent surge in natural gas prices may have provoked some optimism in the energy sector, but it’s not enough to encourage more drilling, according to Barclays Capital, which expects the rig count to not surpass 450 this year.

Quelling previous optimism for at least a partial return of its idled nuclear generating plant this summer, Southern California Edison Co. (SCE) officials Thursday said the San Onofre Nuclear Generating Station (Songs), which has been shut down since January for repairs of flawed tubing, will not resume operations this summer. As a result, more natural gas-fired generation from old coastal plants and other measures will take up the slack.

A contract signed last week for the liquefaction and export of domestically produced natural gas lends further credibility to the shale gas optimism that has swept the energy industry in recent years, and it could quiet skeptics who think the United States isn’t poised to become an exporter of gas to global markets.

A newly signed contract for the liquefaction and export of domestically produced natural gas lends further credibility to the shale gas optimism that has swept the energy industry in recent years.

Although there was similar optimism two weeks earlier, Pacific Gas and Electric Co. (PG&E) signaled Thursday it expects a settlement on “nearly all issues” to be reached Friday in its billion-dollar general rate case. It is perhaps further verification that settlement talks are progressing positively.

In a sign of renewed optimism in U.S. drilling, Houston-based Noble Energy Inc. last week agreed to pay $494 million to buy nearly all of the natural gas and oil reserves in eastern Colorado held by the U.S. arm of Canada’s Suncor Energy Inc.

Optimism among North American natural gas and oil producers appears to be rising, with capital expenditures (capex) expected to jump overall by 12% in 2010 to $79 billion, Barclays Capital analysts said in their year-end 2009 survey. The biggest growth will come from an uptick in gas shale drilling.