Schlumberger books smaller profit in first quarter
Oilfield services provider Schlumberger recorded a smaller profit in the first quarter of the year despite increase in revenues when compared to the prior-year period. Schlumberger expects the oil market sentiments to steadily improve over the course of 2019.
According to its financial report for the first quarter of 2019 Schlumberger’s revenues increased by 1% to $7.879 billion from $7.829 billion in the first quarter of 2018.
The oilfield services provider recorded a 20% decrease in net income during 1Q 2019. Namely, the company posted a $421 million net income for the first quarter of 2019, compared to $525 million in the same period last year.
Schlumberger Chairman and CEO, Paal Kibsgaard, commented, “From a macro perspective, we expect the oil market sentiments to steadily improve over the course of 2019, supported by a solid demand outlook combined with the OPEC and Russia production cuts taking full effect, slowing shale oil production growth in North America, and a further weakening of the international production base as the impact of four years of underinvestment becomes increasingly evident.”
E&P investments starting to normalize
Kibsgaard added: “We also continue to see clear signs that E&P investments are starting to normalize as the industry heads toward a more sustainable financial stewardship of the global resource base. Directionally, this means that higher investments in the international markets are required simply to keep production flat, while North America land is set for lower investments with a likely downward adjustment to the current production growth outlook.
“Our view of the international markets is consistent with recent third-party spending surveys, suggesting that E&P investments will increase by 7 to 8% in 2019, supported by a higher rig count and a rise in the number of customer project FIDs. In line with this, offshore development activity plans continue to strengthen, with subsea tree awards reaching their highest level since 2013 last year. We are also seeing the start of a return to exploration activity on renewed interest in reserves replacement. Notably, new discoveries in 2018 were at the lowest level since 2000.”
Positive market shift
Kibsgaard also said: “The normalization of global E&P spending, with increased international market investments and a reduction in North America land capex, represents a positive market shift for Schlumberger and the welcome return of a very familiar opportunity set, given our unmatched global strength.
“We have further extended our global leadership position with the efforts and investments we have made in recent years of modernizing our execution platform, expanding our technology offering, driving digital and technology-system innovation, evolving our business models, and strengthening our global footprint.
“In addition, after enduring four years of major pricing concessions in support of our international customers, we see the recovery of international service and product pricing and improving our own financial returns as a major business priority—firmly supported by increasing activity levels, little to no spare equipment capacity, and prudent deployment of new capital. Furthermore, the foundation for our 2019 business plan is a clear commitment to generate sufficient cash flow to cover our business needs without increasing net debt.”
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