The Road To Recovery Is Long For Oilfield Services
By Tsvetana Paraskova - Nov 10, 2020
“This has probably been the most challenging quarter in past decades,” Schlumberger’s chief executive Olivier Le Peuch said in the second-quarter results release of the world’s largest oilfield services provider. The U.S. oilfield services sector saw the worst of this downturn in the second quarter when producers dramatically cut drilling and completion activity and capital programs in the wake of the worst oil price rout in recent memory.
In the third quarter, U.S. oil producers brought some of the curtailed production back online and started adding rigs—albeit in slim numbers—for the first time since price crashed at the end of the first quarter. The oilfield services sector breathed a collective sigh of relief that the worst of the crisis in the upstream has passed, and things couldn’t go worse than they did in the second quarter.
However, the recovery will likely take years, while the outlook is still uncertain as the second wave of COVID-19 threatens to derail the fragile recovery in global oil demand.
The world’s biggest oilfield services providers saw their losses shrink in Q3 from the massive losses of the previous quarter, as activity in the U.S. shale patch started to stabilize along with oil prices. The losses were lower between July and September also because of massive cuts in expenses after oilfield services companies laid off tens of thousands of workers.
While the top providers of oilfield services reduced losses, many oilfield services firms in North America didn’t survive the downturn in the second quarter and the number of companies that filed for bankruptcy in the third quarter matched the previous worst quarter for the sector in Q2 2016.
Related: The True Cost Of The Global Energy Transition
Employment in the OFS sector has shown tentative signs of recovery over the past two months, but there are still over 92,000 jobs lost since the pandemic crippled oil demand and prices in March. The worst could be behind us, but the road to recovery will be long, analysts and executives at top OFS firms say.
Top Oilfield Services Providers Cut Losses
The three largest oilfield services providers in the world—Schlumberger, Halliburton, and Baker Hughes—all reported losses for the third quarter. Yet, those losses were significantly lower than the ones seen in the second quarter, “the most challenging quarter in past decades,” as Schlumberger’s Le Peuch said.
Schlumberger’s third-quarter loss of US$82 million was much narrower than the second-quarter loss of US$3.434 billion, with North American revenue down 2 percent sequentially, but a massive 59 percent down compared to Q3 2019.
“The near-term recovery remains fragile owing to potential subsequent waves of COVID-19 that could pose a significant risk to this outlook,” Le Peuch said in the Q3 2020 results release.
Halliburton, the largest fracking services provider in North America, also reported a loss in Q3 due to reduced demand for oilfield services, but it sees activity across the shale patch stabilizing. “The pace of activity declines in the international markets is slowing, while the North America industry structure continues to improve, and activity is stabilizing,” Halliburton’s chief executive Jeff Miller said in a statement.
Baker Hughes also reported a loss for Q3, also lower compared to Q2, but warned of volatility ahead as oil demand recovery appears to have stalled.
“After significant turmoil during the first half of the year, oil markets have somewhat stabilized. However, demand recovery is beginning to level off and significant excess capacity remains, which could create volatility in the future,” chairman and CEO Lorenzo Simonelli said.
North American OFS Bankruptcies Hit Highest Since 2016
The biggest players rely on major cost cuts, revenues from digital oilfield services, and from adjacent non-energy industrial sectors such as chemicals in the case of Baker Hughes.
Related: This Just Became The World's Largest Gas Hub
But for many of the smaller oilfield services companies, the second crisis in four years meant going to bankruptcy courts for protection from creditors. According to the latest tally from law firm Haynes and Boone, 26 North American oilfield services firms filed for bankruptcy in the third quarter—the highest number since Q2 2016 when the same number of firms sought protection from creditors.
“With continuing cutbacks in producers’ CapEx budgets for drilling, completions and other activities in the field, oilfield service companies are feeling the brunt of this impact. Many smaller or highly leveraged OFS companies may not be able to hold on, avoiding seeking protection of the bankruptcy courts,” Haynes and Boone said.
Outlook Remains Uncertain
Despite the somewhat stabilized oil prices and stabilizing activity across the U.S. shale patch, the near-term future of the oilfield services sector is still uncertain because of the still raging pandemic. The second wave looks set to dent oil demand as lockdowns returned in Europe in the fourth quarter.
Commenting on the oilfield services sector after the Q2 price rout, Fitch Ratings said in July: “While we expect oil and gas prices to gradually recover from April’s lows, the OFS market will experience a recovery lag of four to six quarters, as producers will be cautious about increasing exploration and drilling activity and will be unlikely to reverse pricing concessions obtained from service providers.”
Overall job losses in the U.S. oilfield services sector stopped in September, with employment rising by around 8,600 jobs in September and October combined, the Petroleum Equipment & Services Association (PESA) said on Monday in an analysis based on Bureau of Labor Statistics (BLS) data.
However, estimated job losses due to pandemic-related demand destruction now total 92,302 while OFS employment is down by 101,087 jobs since October 2019.
“While the worst of the cutbacks appear to be behind the industry, the outlook remains uncertain because a resurgence in COVID-19 cases could suppress demand and derail economic recovery,” PESA said.
By Tsvetana Paraskova for Oilprice.com
https://oilprice.com/Energy/Energy-General/Th...vices.html
By Tsvetana Paraskova - Nov 10, 2020
“This has probably been the most challenging quarter in past decades,” Schlumberger’s chief executive Olivier Le Peuch said in the second-quarter results release of the world’s largest oilfield services provider. The U.S. oilfield services sector saw the worst of this downturn in the second quarter when producers dramatically cut drilling and completion activity and capital programs in the wake of the worst oil price rout in recent memory.
In the third quarter, U.S. oil producers brought some of the curtailed production back online and started adding rigs—albeit in slim numbers—for the first time since price crashed at the end of the first quarter. The oilfield services sector breathed a collective sigh of relief that the worst of the crisis in the upstream has passed, and things couldn’t go worse than they did in the second quarter.
However, the recovery will likely take years, while the outlook is still uncertain as the second wave of COVID-19 threatens to derail the fragile recovery in global oil demand.
The world’s biggest oilfield services providers saw their losses shrink in Q3 from the massive losses of the previous quarter, as activity in the U.S. shale patch started to stabilize along with oil prices. The losses were lower between July and September also because of massive cuts in expenses after oilfield services companies laid off tens of thousands of workers.
While the top providers of oilfield services reduced losses, many oilfield services firms in North America didn’t survive the downturn in the second quarter and the number of companies that filed for bankruptcy in the third quarter matched the previous worst quarter for the sector in Q2 2016.
Related: The True Cost Of The Global Energy Transition
Employment in the OFS sector has shown tentative signs of recovery over the past two months, but there are still over 92,000 jobs lost since the pandemic crippled oil demand and prices in March. The worst could be behind us, but the road to recovery will be long, analysts and executives at top OFS firms say.
Top Oilfield Services Providers Cut Losses
The three largest oilfield services providers in the world—Schlumberger, Halliburton, and Baker Hughes—all reported losses for the third quarter. Yet, those losses were significantly lower than the ones seen in the second quarter, “the most challenging quarter in past decades,” as Schlumberger’s Le Peuch said.
Schlumberger’s third-quarter loss of US$82 million was much narrower than the second-quarter loss of US$3.434 billion, with North American revenue down 2 percent sequentially, but a massive 59 percent down compared to Q3 2019.
“The near-term recovery remains fragile owing to potential subsequent waves of COVID-19 that could pose a significant risk to this outlook,” Le Peuch said in the Q3 2020 results release.
Halliburton, the largest fracking services provider in North America, also reported a loss in Q3 due to reduced demand for oilfield services, but it sees activity across the shale patch stabilizing. “The pace of activity declines in the international markets is slowing, while the North America industry structure continues to improve, and activity is stabilizing,” Halliburton’s chief executive Jeff Miller said in a statement.
Baker Hughes also reported a loss for Q3, also lower compared to Q2, but warned of volatility ahead as oil demand recovery appears to have stalled.
“After significant turmoil during the first half of the year, oil markets have somewhat stabilized. However, demand recovery is beginning to level off and significant excess capacity remains, which could create volatility in the future,” chairman and CEO Lorenzo Simonelli said.
North American OFS Bankruptcies Hit Highest Since 2016
The biggest players rely on major cost cuts, revenues from digital oilfield services, and from adjacent non-energy industrial sectors such as chemicals in the case of Baker Hughes.
Related: This Just Became The World's Largest Gas Hub
But for many of the smaller oilfield services companies, the second crisis in four years meant going to bankruptcy courts for protection from creditors. According to the latest tally from law firm Haynes and Boone, 26 North American oilfield services firms filed for bankruptcy in the third quarter—the highest number since Q2 2016 when the same number of firms sought protection from creditors.
“With continuing cutbacks in producers’ CapEx budgets for drilling, completions and other activities in the field, oilfield service companies are feeling the brunt of this impact. Many smaller or highly leveraged OFS companies may not be able to hold on, avoiding seeking protection of the bankruptcy courts,” Haynes and Boone said.
Outlook Remains Uncertain
Despite the somewhat stabilized oil prices and stabilizing activity across the U.S. shale patch, the near-term future of the oilfield services sector is still uncertain because of the still raging pandemic. The second wave looks set to dent oil demand as lockdowns returned in Europe in the fourth quarter.
Commenting on the oilfield services sector after the Q2 price rout, Fitch Ratings said in July: “While we expect oil and gas prices to gradually recover from April’s lows, the OFS market will experience a recovery lag of four to six quarters, as producers will be cautious about increasing exploration and drilling activity and will be unlikely to reverse pricing concessions obtained from service providers.”
Overall job losses in the U.S. oilfield services sector stopped in September, with employment rising by around 8,600 jobs in September and October combined, the Petroleum Equipment & Services Association (PESA) said on Monday in an analysis based on Bureau of Labor Statistics (BLS) data.
However, estimated job losses due to pandemic-related demand destruction now total 92,302 while OFS employment is down by 101,087 jobs since October 2019.
“While the worst of the cutbacks appear to be behind the industry, the outlook remains uncertain because a resurgence in COVID-19 cases could suppress demand and derail economic recovery,” PESA said.
By Tsvetana Paraskova for Oilprice.com
https://oilprice.com/Energy/Energy-General/Th...vices.html
