Are Revenues Falling for Oilfield Services Companies?
The ups and down of OFS revenues
In this article, we’ll discuss OFS (oilfield equipment and services) companies’ revenue trends by comparing the largest four OFS companies in the United States.
The OFS industry had strong revenue growth from 2009 to 2014. This was led primarily by higher upstream activity during the period. Energy production increased steadily in the United States, primarily led by strong growth in tight oil production in unconventional shales.
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OFS companies whose performances were closely tied to the performances of upstream companies also did well. However, energy companies’ revenues crashed starting in mid-2014, when crude oil price started to tank. Low energy production also reversed OFS companies’ fortunes. Since 1Q15, OFS companies’ revenues have been falling.
What happened to Schlumberger?
Schlumberger (SLB), the largest US OFS company by revenue, saw its revenue more than double from 2009 to 2014. In line with the industry trend, SLB’s 2015 revenue fell 27% compared to the previous year. The trend also continued in the first nine months of 2016, when SLB’s revenue fell 25% compared to the same period a year ago.
Reduced upstream activity, pressure on SLB’s products and service prices, and the company’s Cameron segment’s weaker performance are keeping SLB’s revenues depressed.
Revenue trends for HAL, BHI, and NOV
Halliburton (HAL) saw 124% revenue growth from 2009 to 2014. However, HAL’s 2015 revenue fell 28% compared to the previous year. The trend continued in the first nine months of 2016, when HAL’s revenue fell 36% compared to the same period a year ago.
Baker Hughes’s (BHI) revenue fell 154% from 2009 to 2014. BHI’s 2015 revenue fell 36% compared to its 2014 revenue. Its first nine months of revenue in 2016 fell 40% compared to the same period a year earlier. BHI makes up 8.6% of the iShares US Oil Equipment & Services ETF (IEZ).
At 69%, National Oilwell Varco’s (NOV) revenue growth was relatively moderate from 2009 to 2014. In 2015, NOV’s revenue fell 31% compared to 2014. In 2016, the company’s revenue dipped more than its peers’. From the first nine months of 2015 to the first nine months of 2016, NOV’s revenue fell 54% compared to the same period a year earlier. This fall was mostly due to slowdowns in the international, offshore, and capital equipment markets.
Next, we’ll discuss the net income trend in the OFS industry.