This website collects cookies to deliver better user experience. Cookie Policy
Accept
Sign In
The Wall Street Publication
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Reading: Services Are Yet Another Snag for Oil and Gas
Share
The Wall Street PublicationThe Wall Street Publication
Font ResizerAa
Search
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Have an existing account? Sign In
Follow US
© 2024 The Wall Street Publication. All Rights Reserved.
The Wall Street Publication > Blog > Markets > Services Are Yet Another Snag for Oil and Gas
Markets

Services Are Yet Another Snag for Oil and Gas

Editorial Board Published October 22, 2021
Share
Services Are Yet Another Snag for Oil and Gas
SHARE

Scarcity sometimes begets more scarcity.

Contents
The industry’s equipment shortage isn’t expected to get better soon.Newsletter Sign-upHeard on the Street

The latest source of shortage comes from the oil field service industry, which has less equipment and fewer employees after years of austerity. Meanwhile, oil and gas prices are near multiyear highs. All three major servicers— Halliburton, HAL 2.13% Schlumberger SLB -1.14% and Baker Hughes BKR 1.52% —said in their earnings calls this week that they are negotiating price hikes with their customers as a result. Higher labor costs, stretched supply chains and inflation are feeding into those price increases, too.

That isn’t such a bad thing for the three companies, all of which had to weather pricing cuts last year. But, as for many companies, it isn’t free from near-term snags. Hurricane Ida, which curtailed production in the Gulf of Mexico, put a dent in all of their third quarter revenues, and all three missed top-line expectations for the quarter. Baker Hughes in particular had a rough time; its digital solutions division was impacted by electrical component shortages around semiconductors, boards and displays. Since Tuesday, when the first of the three oil field services giants reported earnings, Halliburton and Baker Hughes shares have shed 1.7% and 8.4%, respectively. Schlumberger shares have edged down by 0.6%.

Equipment supply is tight enough, and oil and natural gas prices high enough, that some customers are starting tenders for services earlier than usual. It is hard to tell how much the scramble will affect energy prices. Directionally speaking, though, the equipment shortage isn’t likely to get better soon. Service companies tightened their belts earlier than their clients and all now plan to continue their spending discipline. Halliburton’s capital expenditure budget today is roughly a quarter of what it was seven years ago, the last time Brent crude prices touched $85. It plans to keep capital expenditures capped at 5% to 6% of revenue. If the market for services is tight today with the world’s producers pumping five million barrels less a day of oil than 2019,  the situation isn’t going to get better next year when oil production is expected to exceed pre-pandemic levels.

Notwithstanding short-term hiccups, a tight market with increasing demand is a sweet spot for services firms. Both the Organization of the Petroleum Exporting Countries and the International Energy Agency expect oil demand to increase until at least the 2030s. That oil must be extracted somewhere in the world, even if U.S. drillers maintain discipline. Barring sudden discord between OPEC+ members or sudden drilling activity from large U.S. producers, prices seem likely to stay above pre-pandemic levels.

The industry’s equipment shortage isn’t expected to get better soon.

Photo: jessica lutz/Reuters

International service firms are in a strong negotiating position, and they are already leaner and more profitable than they were pre-pandemic. The shock of 2020 forced them to learn new capabilities such as remote monitoring for drilling. Schlumberger in the third quarter squeezed out more net income than the second quarter of 2019 on a revenue base that is 30% lower.


Newsletter Sign-up

Heard on the Street

Agenda-setting analysis and commentary on the biggest corporate and market stories.


Halliburton is already shuffling some equipment to more lucrative jobs abroad. Moreover, the company notes that new fields are smaller and require more work to produce more barrels, which translates to more dollars. Servicers are also seeing that they can get a pretty penny (“pricing traction,” as Halliburton puts it) for selling low-emissions equipment, which will likely be in high demand in coming years. Baker Hughes’ digital solutions division seems well positioned to profit from helping firms monitor and manage emissions.

Despite the rosy outlook, service firms’ shares look cheap. On average, their price-to-forward-earnings ratio is 28% below their 10-year average. Their share prices have climbed out of a deep hole, but this is still a good opportunity to get in on the ground floor.

Write to Jinjoo Lee at [email protected]

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

TAGGED:MarketsPAIDWall Street Publication
Share This Article
Twitter Email Copy Link Print
Previous Article Tablet Computers and 8 Other Pieces of Tech That Date You Tablet Computers and 8 Other Pieces of Tech That Date You
Next Article Woman shot on film set remembered as gifted cinematographer Woman shot on film set remembered as gifted cinematographer

Editor's Pick

California dwelling of lacking child’s mother and father searched; father has served time for youngster cruelty

California dwelling of lacking child’s mother and father searched; father has served time for youngster cruelty

San Bernardino County sheriff’s investigators on Sunday, Aug. 17, searched the house of the mother and father of the infant…

By Editorial Board 9 Min Read
Farmer Needs a Spouse: John Sansone and Claire Dinette Break up!
Farmer Needs a Spouse: John Sansone and Claire Dinette Break up!

Studying Time: 2 minutes It's sadly over for one more actuality tv…

4 Min Read
Steak ‘n Shake slams Cracker Barrel CEO for eliminating ‘old-timer’ from emblem: ‘We take delight in our historical past’
Steak ‘n Shake slams Cracker Barrel CEO for eliminating ‘old-timer’ from emblem: ‘We take delight in our historical past’

FOX Enterprise’ Jeff Flock experiences on Cracker Barrel unveiling a brand new…

4 Min Read

Oponion

6 Greatest Dove Deodorants For Males: Clear, Contemporary Scents in 2024 | Fashion

6 Greatest Dove Deodorants For Males: Clear, Contemporary Scents in 2024 | Fashion

Once you consider Dove deodorant, moreish pit-freshening scents and delicate…

September 19, 2024

Garth Brooks Has Been Accused of Rape by Make-up Artist

Garth Brooks has been accused of…

October 4, 2024

Eric Adams tells voters to ‘cancel’ him as he floats rejoining the GOP

In a sequence of interviews early…

December 6, 2024

akenza Strengthens International CaaS Management with Netmore LoRaWAN® Integration

New integration expands IoT protection throughout…

June 10, 2025

This Black Friday, What’s the Best Way to Pay?

Two payment options are vying hard…

November 25, 2021

You Might Also Like

Trump’s 401(ok) enlargement fuels ethereum growth
Markets

Trump’s 401(ok) enlargement fuels ethereum growth

FOX Enterprise' Gerri Willis has the main points on the funding technique on 'Varney & Co.' Practically $4 billion of…

4 Min Read
Steak ‘n Shake slams Cracker Barrel CEO for eliminating ‘old-timer’ from emblem: ‘We take delight in our historical past’
Markets

Cracker Barrel inventory plunges amid model makeover backlash

FOX Enterprise’ Jeff Flock reviews on Cracker Barrel unveiling a brand new brand as a part of a broader model…

3 Min Read
Intel will get  billion from Softbank as White Home mulls stake
Markets

Intel will get $2 billion from Softbank as White Home mulls stake

Former Chrysler and Dwelling Depot CEO Bob Nardelli praises President Donald Trump’s daring financial play because the White Home eyes…

5 Min Read
Intel will get  billion from Softbank as White Home mulls stake
Markets

White Home mulls 10% stake in Intel after CEO assembly

Former Chrysler and Dwelling Depot CEO Bob Nardelli praises President Donald Trump’s daring financial play because the White Home eyes…

4 Min Read
The Wall Street Publication

About Us

The Wall Street Publication, a distinguished part of the Enspirers News Group, stands as a beacon of excellence in journalism. Committed to delivering unfiltered global news, we pride ourselves on our trusted coverage of Politics, Business, Technology, and more.

Company

  • About Us
  • Newsroom Policies & Standards
  • Diversity & Inclusion
  • Careers
  • Media & Community Relations
  • WP Creative Group
  • Accessibility Statement

Contact

  • Contact Us
  • Contact Customer Care
  • Advertise
  • Licensing & Syndication
  • Request a Correction
  • Contact the Newsroom
  • Send a News Tip
  • Report a Vulnerability

Term of Use

  • Digital Products Terms of Sale
  • Terms of Service
  • Privacy Policy
  • Cookie Settings
  • Submissions & Discussion Policy
  • RSS Terms of Service
  • Ad Choices

© 2024 The Wall Street Publication. All Rights Reserved.

Welcome Back!

Sign in to your account

Lost your password?