International Growth Delivers Resilient Third Quarter Earnings
Higher oil prices and increased demand resulted in better returns for oilfield service companies.
Despite fluctuating oil prices, continued geopolitical tensions, and environmental concerns, oilfield service (OFS) firms displayed remarkable resilience and adaptability, as evidenced in this week's Q3 2023 earnings reports.
SLB, the world's top OFS firm, reported robust revenue figures, bolstered by strong performance in its international operations, with its strategic focus on technological innovation and cost efficiency measures paying dividends, contributing to its solid earnings.
The OFS giant reported a 24% growth in quarterly earnings, posting a net profit attributable to the company of $1.12 billion in the third quarter of 2023, compared with a net gain of $907 million in the same period a year ago. The company said its international revenue and North America revenue grew at 12% and 6%, respectively.
"I am very pleased with these results, demonstrating how SLB continues to seize this multiyear growth cycle,” said Olivier Le Peuch, chief executive of SLB. “Our differentiated technology and service offerings, combined with our focus on the quality of our revenue, enabled profitable growth and drove our adjusted EBITDA [earnings before interest, taxes, depreciation, and amoritization] margin to a new cycle high of 25%.”
Halliburton beat market expectations on its third-quarter profit despite revenues remaining flat in core regional markets, with international drilling and equipment demand providing a cushion against weakness in its North American business.
The company reported a net income of $716 million in the third quarter, compared with a net gain of $544 million in the same period a year ago. Total revenues for the quarter ending 30 September were $5.8 billion, up 8% from a year ago and flat compared with the second quarter of 2023.
International revenue for the third quarter was $3.2 billion, a 3% increase; however, North American revenue was $2.6 billion, a 3% sequential decrease. The decline was primarily driven by decreased pressure pumping services in US land and lower well intervention services in the Gulf of Mexico. The company said that partially offsetting these decreases were improved completion tool sales in the Gulf of Mexico.
“I am pleased with the stability of our North American business and the profitability of our international growth,” said Jeff Miller, Halliburton's chief executive. “Halliburton delivered an impressive third quarter, and our margin strength demonstrated the power of our strategy. Everything I see today strengthens my conviction in the long duration of this upcycle. Against this backdrop, we expect continued demand growth for oilfield services in 2024 and beyond,” he added.
Baker Hughes, buoyed by a booming demand for liquefied natural gas (LNG) and subsea equipment, reported a net income of $518 million in the third quarter, compared with a net loss of $17 million in the same period last year. The company reported revenues for the quarter of $6.6 billion, marking a 24% increase compared with the previous year.
"We were pleased with our third quarter results and remain optimistic on the outlook. We maintained strong order performance in both industrial and energy technology and oilfield services and equipment, with large awards from Venture Global in LNG and Vår Energi in subsea. We also delivered strong operating results at the upper end of our EBITDA guidance range, booked almost $100 million of new energy orders, and generated $592 million of free cash flow. We continue to see positive momentum across our portfolio despite persisting global economic uncertainty," said Lorenzo Simonelli, Baker Hughes chairman and chief executive officer.
"Oil prices have rebounded as the combination of resilient oil demand and production cuts have tightened the market. As a result, the oil market is likely to see inventory draws through the rest of 2023. Continued discipline from the world’s largest producers, the pace of oil demand growth in the face of economic uncertainty, and geopolitical risk will be important factors to monitor as we look into 2024," he added.
Weatherford International also had a strong quarter, with a revenue of $1.31 billion, up 17% year-over-year. The company reported a net income of $123 million, compared with a net gain of $28 million in the same period last year.
Its North American business segment saw an improvement of 2% sequentially, in part because of its Canadian business, with international growth supported by strong performances in the Middle East, North Africa, and Asia regions, the company said.
“I am grateful to the One Weatherford team for their commitment to our strategic priorities. The result of this commitment is manifested in another quarter of top-line growth, margin expansion, and free cash flow generation, with adjusted EBITDA margins setting another record,” said Weatherford chief executive Girish Saligram.
“The first three quarters of 2023 are a springboard to close the year with strong momentum, as we expect revenues to continue to grow in the fourth quarter, and we now expect full-year adjusted EBITDA margins to expand over 400 basis points year-over-year, with adjusted free cash flow over $450 million,” he added.