Schlumberger’s Earnings Up 8%, CEO Sees "Durable" Growth For Broader Upstream Market
Schlumberger beat Wall Street expectations in its second quarter and is seeing positive signals in its international growth prospects.
Schlumberger told investors on 23 July that its business is improving as second- quarter revenue topped $5.63 billion, up 8% sequentially. The period’s net income was $431 million with earnings per share at 30 cents, which was up 43% from the prior quarter and beat traders’ expectations of about 26 cents.
Schlumberger took in $4.5 billion in revenue from its international business compared to $1.1 billion in North American revenue. The breakdown reflects the company’s shift to international markets which accelerated during the pandemic with the sale of its North American hydraulic fracturing business last year.
Schlumberger CEO Olivier Le Peuch said on a Friday earnings call that the world’s largest service company sees “a solid activity growth outlook” for North America where revenue for the quarter was up 11%. However, he added that the rebound is taking place in what has become a “structurally smaller” market.
He cited restraint on behalf of the publicly traded operators and ongoing consolidation efforts as driving factors. Le Peuch pointed out that US benchmark crude prices are now above pre-pandemic levels, but that the number of active rigs and fracturing crews in North America remains well below early-2020 totals.
Le Peuch painted a brighter picture for markets elsewhere, noting that the second quarter saw signs of an offshore recovery and marked the second consecutive quarter of an increasing international rig count.
Revenue in the Middle East and Asian markets was $2 billion for the quarter, up 4% from the first 3 months of the year. This was followed by European, central Asian, and African markets which increased by 16% to $1.5 billion in revenue. Schlumberger recorded $1.1 million from Latin American operations, up just 2% from the prior quarter.
Speaking to the international market, he said “the deficit in investment needed to deliver the required oil supply presents a sustained growth opportunity, particularly in the low-cost, advantaged basins.
“Looking farther out, we see favorable conditions for durable investment growth driven by the combination of actions by NOCs, internationally focused investment by public E&P operators, and the expectation of continued supply discipline by OPEC+, all in response to the steady evolution of demand."
Among the technology advances Schlumberger highlighted included its newest product line of energy-transition technologies. This includes the recently debuted CO2- and H2S-capturing membrane technology called CYNARA, which was used in west Texas to separate more than 200 Mt of CO2 from natural gas for the giant midstream operator Kinder Morgan.
Also in west Texas, Schlumberger and Occidental Petroleum set a new companywide record for lateral drilling, reaching 9,506 ft with a rotary steerable tool in 24 hours. The new footage record tops the old one by 20%, according to Schlumberger.
Schlumberger was also awarded a 3-year contract from Qatar Petroleum for real-time drilling optimization services. The project will involve using remote operations centers and automated drilling and completions software developed by Schlumberger.
Schlumberger’s second quarter earnings follow that of its two chief rivals, Baker Hughes and Halliburton.