HOUSTON (Reuters) – Schlumberger, the world’s largest oilfield services provider, warned on Tuesday that its fourth-quarter North America revenues will likely decline 15 percent sequentially on steeper-than-expected price declines in hydraulic fracturing.
The drop in hydraulic fracturing activity this year has been “significantly larger” than expected, Patrick Schorn, executive vice president of wells at Schlumberger, said at a conference in New York, leading to a bigger decline in pricing than the company had forecast originally.
Oilfield service companies this year have been hit by a slowdown in demand as regional oil prices have fallen with transportation bottlenecks faced by producer customers. A recent drop in the U.S. benchmark crude to around $53 a barrel also has stoked concern of an oil glut next year.
Schlumberger is “guiding consensus lower” through the first quarter of 2019, analysts for investment firm Raymond James wrote in a note following Schorn’s presentation.
Shares of Schlumberger were down about 2.6 percent in afternoon trading on Tuesday, at $44.62, amid a broad market decline. The stock is down roughly 44 percent since January.
Hydraulic fracturing pumps water and sand at high pressure into a well to release oil and gas trapped in shale rock. Oil producers have been pulling back on fracking and completing wells because of the pipeline bottlenecks and price weakness.
Schorn said recent price declines would likely prompt its customers to take “a more conservative” approach during the start of 2019 and that any ramp-up in international investment also could be tepid.
“Looking forward to next year, the recent volatility in oil prices has introduced more uncertainty to the outlook” for exploration and production spending in 2019, Schorn said.
Schlumberger’s North America revenue, including its Cameron International business, was $3.12 billion in the third quarter, accounting for roughly 38 percent of total revenue.
A year ago Schlumberger acquired Weatherford International’s U.S. pressure pumping business for $430 million, positioning it to better compete with rival Halliburton. Both companies have seen shares fall sharply this year amid the slowdown in hydraulic fracturing demand.
Reporting by Liz Hampton; editing by Diane Craft and Leslie Adler