Industry Upcycle Continues To Reward Halliburton and SLB

The world's two largest oilfield service outfits are riding a wave a renewed upstream spending while Baker Hughes posted its second straight quarterly loss.

Red containers at station in large field
Electric pressure pumping units completing a horizontal well.
Source: Halliburton.

Earnings season for the top three oilfield service companies concluded this week with Halliburton reporting significant income growth in the third quarter.

Houston-based Halliburton took in more than $544 million in adjusted income during the quarter ending in September, dwarfing both the second-quarter figure of $109 million and more than doubling 2021's third-quarter income of $248 million.

Total revenue for the service company in the third quarter was up by 6% to $5.4 billion compared with $5.1 billion in the second quarter.

“In all markets, Halliburton’s strong financial results demonstrate the execution of our strategic priorities. I believe structural demand for more oil and gas supply will provide strong tailwinds for our business, and Halliburton is well-positioned to deliver improved profitability and increased returns for shareholders,” Jeff Miller, CEO of Halliburton, told investors this week.

Halliburton booked $2.6 billion in third-quarter revenue from its North American business. This marks a 9% rise over the region’s second-quarter revenue and was driven by increased demand for pressure pumping and drilling services.

The chief of the world’s largest pressure pumping provider added that in North America, “the inbounds for calendar slots are strong than I have seen at this point in the year.”

Internationally, Halliburton saw third-quarter revenue increase by 3% sequentially to $2.7 billion. The total reflects an 11% drop in European and African revenues, almost all of which is the result of Halliburton’s divestment of its Russian business unit and shrinking demand for services in the aging North Sea.

Miller was upbeat on the outlook of the company’s international footprint, saying during the earnings call, “we see activity increasing around the world, from the smallest to the largest countries and producers.”

SLB Sees Best Yearly Growth in a Decade

Last week, both Schlumberger—which as of this week is known as SLB—and Baker Hughes also reported their third-quarter earnings.

SLB was able to greet its investors with a 10% rise in total revenues as compared with the previous quarter. The company reported more than $7.47 billion in third-quarter revenues.

The figure also translates to a year-over-year increase of 28% which Schlumberger said is the highest growth rate it has seen since 2011.

Olivier Le Peuch, CEO of SLB, said the second half of the year is shaping up to become “one of the most exciting times for the company in the recent past” and said he expects the fourth quarter to also show sequential growth.

“Despite concerns over a slowdown in global growth rates and the potential for recession, the fundamentals for energy as a critical resource remain very constructive,” said Le Peuch, who added that there is room for “multiple years of growth” in the global drilling market.

North American revenues were flat sequentially but up by 37% year-over-year. International revenues for Schlumberger rose by 13% sequentially and 26% year-over-year.

Looking forward, Schlumberger is expecting a “simultaneous” expansion of both these segments. US land will lead the North American growth, while Le Peuch said the Middle East will drive growth in its international business.

Baker Hughes Posts Smaller Loss

Bakers Hughes' earnings release revealed that the company continues to face headwinds after it booked its second straight quarterly loss.

Attributed to restructuring and impairment costs of $230 million, Baker Hughes saw a net loss during the third quarter of $17 million. This is compared with a $839 million loss posted during the second quarter which executives said was the result of winding down its Russian business and supply chain bottlenecks.

Baker Hughes CEO Lorenzo Simonelli offered what was the most cautious outlook of the three service company leaders when speaking with investors last week.

“The macro outlook has grown increasingly uncertain as the global economy is dealing with strong inflationary pressures, a rising interest rate environment, and sizeable fluctuations in global currencies. Despite these economic challenges, we remain positive on the outlook for oil and gas,” said Simonelli. The CEO also reiterated that Baker Hughes sees a multiyear upcycle for upstream investments and that high natural gas prices—and in particular high LNG prices—will drive more project approvals.

“On the new energy front, recent policy movements in Europe and the US are likely to help support a significant increase in clean energy development,” added Simonelli.