Schlumberger sees capital spending increase of 20% or more in North America in 2022: CEO

The recovery from the coronavirus pandemic continues to improve the energy landscape as both oil prices and demand gather momentum around the world after two quiet years of spending and drilling austerity, oilfield services giant Schlumberger said Jan. 21.

Schlumberger expects “a period of stronger rebound in short-cycle activity” in 2022, driven by improved visibility of the demand recovery and greater confidence in the oil price environment, the company’s CEO Olivier Le Peuch said during a earnings call on the fourth quarter.

“We expect an increase in capital spending of at least 20% in North America, which will impact both onshore and offshore markets,” said Le Peuch, which will be felt in the first half of the year. “Internationally, capital spending is forecast to increase in the low to mid-teens, gaining momentum with a very strong exit in the second half of 2021.”

“All sectors and operating environments, short- and long-cycle, including deepwater, are expected to experience strong growth with upside potential [coronavirus omicron variant] Disorders dissipate as [2022] progress,” he said.

While Schlumberger is still grappling with pandemic-related disruptions, the first quarter of 2022 will likely show typical weather-related seasonality, he said. That could translate into a roughly 4% drop in sales in the first quarter, Cowen analyst Marc Bianchi said in a Jan. 21 note to investors.

However, the second quarter will be followed by a “strong seasonal uptrend” that will likely affect all areas of the company, including well construction, reservoir performance, production systems and digital & integration. Growth should strengthen further in the latter part of the year, Le Peuch said.

Not “if” but “when”

“So it’s not a question of if, it’s a question of when,” he added.

Increased offshore activity has already begun, as evidenced by a number of final investment decisions for projects on a global scale in the second half of 2021, and this is expected to accelerate later this year and even further into 2023, the CEO said.

Offshore hub and spoke development “clearly lifted [E&P] fourth-quarter reservoir analysis spending and bodes well for a more active 2022 and 2023,” Wells Fargo analyst Roger Read said in an investor note issued shortly after the earnings call.

Longer-term economic growth is likely to drive demand in oil markets past peaks into late 2022 and 2023 — and even a few years beyond — Le Peuch added.

The diminishing, but still existing, imbalance between supply and demand in the oil markets has not only pushed up oil prices, but has also expanded investment across the board, although due to underinvestment, but also because of the “structurally smaller than previous cycles.” ‘ is and will remain ‘supply shortages’, including on the oilfield services side, he said.

Schlumberger’s net income for the fourth quarter of 2021 totaled $601 million, an increase of 9% sequentially and a 61% increase year-on-year.

Fourth-quarter revenue of $6.22 billion increased 6% sequentially and 13% year-on-year. That includes $4.9 billion from International operations, up 5% sequentially and up 13% year-over-year, and $1.3 billion from North America, up 13% sequentially and up 10% YoY.

Revenue is growing from offshore data licensing

The sequential growth from North America was driven by strong offshore and land drilling as well as increased licensing of exploration data in the US Gulf of Mexico and the Permian Basin in West Texas/New Mexico, Schlumberger said in a statement. International improvements resulted primarily from stronger activity, increased digital sales and early benefits of price improvements.

The Middle East/Asia segment generated the largest regional revenue of $2.1 billion in the fourth quarter. Europe/CIS/Africa generated $1.6 billion and Latin America generated $1.2 billion. Revenues for these areas increased sequentially by 4%, 7%, and 5%, respectively.

In the fourth quarter, Schlumberger’s custom pool and energy transition technology continued to improve, and these refinements should continue to drive corporate earnings throughout 2022 as they command a premium price.

For example, a Schlumberger Fit-for-Basin technology package enabled ExxonMobil to reduce drill days by 34%, or a total of 26 drill days for five Permian Basin wells, the company said.
Source: Platts

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