Why oilfield service companies are cautious about their outlook



Rig service companies show mixed sentiments

In the last part of the series, we discussed rig count activity in the US onshore and offshore fields. In this part of the series, we’ll discuss the major oil and gas field service companies’ outlook on the US market.

YTD Onshore Offshore

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Management’s views

In their 3Q14 earnings, companies that service rigs—Schlumberger Limited (SLB) and Baker Hughes Incorporated (BHI)—were cautiously bullish about US drilling activities for the rest of the year.

In its latest earnings press release, Baker Hughes said, “We project the U.S. onshore well count will continue to modestly increase into the fourth quarter as we expect the holiday period slowdown to be less pronounced than prior years.”

In its 3Q14 press release, Schlumberger didn’t specifically disclose its outlook for US rig activity. However, it did express concern about the energy oversupply. It said, “Market sentiments are currently driven by short-term oversupply due to the continued growth in North America production.”

You can learn more by reading “Overview: Oil and gas field service Schlumberger’s 3Q14 results.”

Transocean (RIG) is an offshore oil drilling company. It recorded an ~$2.6 billion impairment charge in 3Q14. This was due to “decline in the market valuation of the company’s contract drilling services business.” The decline in crude oil price prompted the impairment charge.

Key stocks and exchange-traded funds (or ETFs)

Land-based rig counts can gauge land-based upstream energy companies’ activity levels. These companies include Devon Energy (DVN) and WPX Energy Inc. (WPX). Some of these companies are part of the S&P Oil & Gas Exploration & Production ETF (XOP).


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