NEW YORK: The world’s top two oilfield service firms on Friday warned slower producer spending and weakness in offshore exploration may weigh on current-quarter earnings, but said activity could improve in the longer term as the global crude market comes into balance.
The outlook drove shares in both companies lower, with Schlumberger NV hitting a 21-month low and Baker Hughes touching a 16-month low before retracing some losses.
Schlumberger, the world’s largest oilfield service company, warned that Wall Street estimates for fourth-quarter earnings may be too high, with customer investments in North American production moderating due to investor pressure for improved shareholder returns.
But global oil supply and demand is becoming more balanced and recent spending cutbacks on US production could eventually boost crude prices, Schlumberger Chief Executive Paal Kibsgaard said.
A current lack of production investments outside North America should benefit producers as inventories fall, Kibsgaard said.
Baker Hughes’ CEO Lorenzo Simonelli was more pessimistic, saying the oilfield services industry continues to be volatile and describing the business environment as “challenging” with customers pushing out some equipment purchases.
“We have seen some improvement in activity but we have not seen meaningful increases in customer capital commitments,” he said.
Schlumberger was last down 3.3 per cent at $62.33 and Baker Hughes off less than 1 per cent at $33.08.
US oil producers are under pressure to boost shareholder returns after ramping up spending earlier this year while oil prices remained flat, knocking share prices back after a sharp run up in 2016.
Brent crude prices have barely budged this year and the US crude benchmark has remained mostly below $55 a barrel. — Reuters
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