The tweeting from Big Oil has a new sound – slightly chirpy, upbeat, no longer depressed and looking to leap off the bough.
Prices are up, commodities generally are on a bit of a run, demand seems to be edging higher, there’s a glimmer in the eyes of OPEC and other big producers (but not the US) about a possible production cap, and prices are no longer in the basement (Nor are they back in the penthouse.
In the last two days, two of the best placed companies to make a call on a turn in the oil and gas market have done just that.
In fact, the world’s two biggest il services groups, Schlumberger and Halliburton have both called the end of the two year plus slide in oil and gas prices that saw prices fall from around $US104in mid 2014 to a low of just under$US27 a barrel for Brent crude in January of this year.
But both tempered their new found optimism by playing down the sort of sharp recovery in revenue and earnings many analysts had been looking for.
Schlumberger, the world’s largest oilfield services group said Thursday evening, US time that its business stabilised in the third quarter.
Like Halliburton, Schlumberger reported earnings for the three months to September that were better than expected,. But Paal Kibsgaard, Schlumberger’s CEO, said he is not not yet looking for a strong broad-based global recovery in the industry next year.
September quarter revenues were slightly below expectations at $US7.02 billion, down 17% from the 3rd quarter of 2015, and it was the deep cost cuts os the past 18 months which helped steady earnings by boosting margins in the latest quarter, relative to the second quarter of this year.
Schlumberger reported a third-quarter profit of $US176 million, or 13 cents a share, down from $US989 million, or 78 cents a share, a year earlier.
Over the past seven quarters Schlumberger’s revenues have dropped by 50%, excluding the effect of its acquisition of Cameron International.
The September quarter was the second period that Schlumberger’s results include Cameron, which makes drilling equipment and supplies maintenance equipment to pipelines, refineries and oil-and-gas wells. Earlier this year, Halliburton was blocked from buying the third placed services group, Baker Hughes.
However, Mr Kibsgaard warned that the company thought that “a broad-based V-shaped recovery is unlikely given the fragile financial state of the industry”.
But he highlighted North American onshore fields, the Middle East and Russia as the prime regions where activity was likely to grow. The US industry could spoil the party as oil and gas groups add more and more rigs to their fields to maintain production – oil rig use is up 40% since May in the US and gas rig ruse has taken a noticeable turn upwards in the past month.
A day earlier Halliburton, the world’s second-largest oilfield services company, also reported earnings that were better than expected, and said “things are getting better” in the industry.
Brent crude oil has risen about 90% from a low point of about $27 per barrel in January to about $US51.40 today. Halliburton in fact said it had net income of $US6 million, or 1 cent a share, in the third quarter, after a loss of $US54 million, or 6 cents a share, in the year-earlier period. Revenue fell to $US3.833 billion from $US5.582 billion.
CEO, Dave Lesar said in a statement. “our view (is) that things are getting better for us and our customers.”and the company is pleased to have returned to profit "given the devastation our industry has faced over the last two years.”
Over the next fortnight, these guarded but upbeat comments will be joined by similar statements from the world’s energy majors as the likes of Exxon Mobil, Chevron, BP, Shell, Total, Repsol and others provide third quarter updates.
And if the OPEC countries and Russia manage to get a credible production cap in place, oil prices could take another jump. That however is a big ask as the likes of Iraq (Shia) have made it clear they will not accept cuts promoted by Saudi (Sunni) Arabia. A lead from Shia Iran might help get Iraq to the table.
