Schlumberger places $2 billion bet on strong oilfield service demand growth

David Wethe January 21, 2022

HOUSTON (Bloomberg) --Schlumberger is gearing up for growth around the world as the No. 1 oilfield contractor expects recovering economies to ignite several years of crude-demand expansion.

The company, based in Houston and Paris, will boost spending as much as 18% to $2 billion, serving North American oil explorers who should dominate activity in the first half of the year, followed by international growth in the final six months.

“Oil demand is expected to exceed pre-pandemic levels before the end of the year and to further strengthen in 2023,” Chief Executive Officer Olivier Le Peuch said in a statement Friday. “Resurgent global demand-led capital spending will result in an exceptional multiyear growth cycle.”

Schlumberger is an industry bellwether because of its unmatched global footprint and extensive international order book. The hired hands of the oil patch are seeing a resurgence in profitability as crude demand rebounds from an historic global collapse. After years of cost cuts, shale explorers and their overseas rivals are all expected to boost spending this year, according to Evercore ISI.

The company plans to hold a “capital markets day” with investors and analysts in the second half of the year to explain its business strategy and what it plans to do with shareholder returns. The service giant more than doubled its free cash flow last year to $3 billion, the highest since 2015. On Friday, it announced a dividend of 12.5 cents a share, the same level it’s been since slashing shareholder payouts in 2020 as crude prices tumbled to historic lows.

The shares, which gained by more than a third last year, fell 0.9% to $36.71 at 11:04 a.m. in New York.

The contractor that helps explorers map pockets of underground crude and drill in water two miles deep expects North American clients both on land and at sea to boost spending by at least 20% this year, while international customers should expand their budgets in the low to mid teens, Le Peuch told analysts and investors Friday on a conference call.

Schlumberger reported a fourth-quarter profit before one-time items of 41 cents a share, the highest since the third quarter of 2019. That exceeded the average of analysts’ estimates of 39 cents. Revenue was $6.2 billion, also beating the average estimate.

The company’s boost in sales for the final three months of the year was led by its massive international business, climbing 13% to $4.9 billion compared to a year earlier. It also posted an unexpected 10% revenue gain in the U.S. and Canada, a region that analysts expected to be slightly down compared to a year earlier, according to data compiled by Bloomberg.

Smaller rival Baker Hughes Co. reported surging demand for its equipment Thursday, reflecting increasing oil consumption around the world. Halliburton Co., the world’s biggest provider of frack work, will release results Jan. 24.

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