Cautious Optimism Reigns as Contractors Bounce Off the Bottom

Halliburton and Baker Hughes see oilfield services sector heading in the right direction this year after a painful 2020.

Pandemic pains ease as oilfield service companies' clients head back to work.

Oilfield services giants Halliburton and Baker Hughes, buoyed by early signs of a North American oilfield recovery, beat Wall Street expectations for first-quarter 2021 earnings. Both firms said they were optimistic about 2021, a far cry from the views from just last year when the pandemic had wrecked global demand and spending cuts and layoffs ruled the day.

Halliburton reported earnings of 19 cents per share versus analysts’ estimates of 17 cents, IBES data from Refinitiv showed. Baker Hughes’ earnings per share of 12 cents topped Wall Street estimates of 11 cents.

Halliburton posted net income of $170 million, or $0.19 per diluted share, for the first quarter of 2021. This compares to a net loss for the fourth quarter of 2020 of $235 million, or $0.27 per diluted share, as well as adjusted net income for the fourth quarter of 2020, excluding impairments and other charges of $160 million, or $0.18 per diluted share. Revenue jumped 7% to $3.5 billion.

“The first quarter marked an activity inflection for the international markets, while North America continued to stage a healthy recovery,” said Jeff Miller, chairman, president, and CEO of Halliburton. “I expect international activity growth to accelerate, and the early positive momentum in North America gives me confidence in the activity cadence for the rest of the year.”

During the quarter, Halliburton successfully delivered real-time control of fracture placement while pumping on a multiwell pad using the SmartFleet intelligent fracturing system in the Permian Basin.

The contractor also introduced the Ovidius isolation system, a new packer that transforms from an engineered metal alloy into a rock-like material when it reacts with downhole fluids, creating a seal for improved well integrity.

Baker Hughes' profits dropped 40% in the first quarter, while adjusted operating income fell to $270 million for the quarter from $462 million last quarter. Year-over-year revenue was down 12% to $4.78 billion. The contractor said stronger-than-expected activity in North America helped mitigate the impacts of a Texas winter storm that impeded the market.

“We remain cautiously optimistic that the global economy and oil demand will recover from the impact of the global pandemic,” said Lorenzo Simonelli, chairman and chief executive at Baker Hughes. “We expect spending and activity levels to gain momentum through the year as the macro environment improves, likely setting up the industry for stronger growth in 2022.”

During the quarter, Baker Hughes advanced its position in the energy transition, investing in strategic areas for growth and entering important partnerships to advance new energy frontiers including hydrogen and carbon capture, utilization, and storage.

Recent pacts included an agreement with PAO NOVATEK to decarbonize natural gas and LNG production by developing and implementing innovative compression and power generation technologies for NOVATEK’s LNG projects.

The contractor also executed a major software deployment for Saudi Aramco, deploying its WellLink service to deliver real-time data visualization and analysis across all Saudi Aramco drilling activities.