The world’s biggest oilfield contractor joined rivals Halliburton Co. and Baker Hughes Co. this week in predicting expansion in overseas work and a more muted recovery in North America through the rest of 2021. Global oil demand should return to pre-pandemic levels by the end of next year, if not sooner, Schlumberger Chief Executive Officer Olivier Le Peuch told analysts on Friday.
“A new growth cycle has finally commenced,” he said in a statement released on Friday. “There is an increasingly positive sentiment in the industry outlook as the recovery strengthens despite the lingering concerns regarding the Covid-19 crisis.”
The service sector that helps oil explorers detect and drill underground reserves is slowly returning to work after a global glut and pandemic-led lockdowns sapped energy demand, triggering job cuts and bankruptcies across the industry. The big three contractors, who this week posted better-than-expected first-quarter results, are pivoting away from the once-booming North American shale patch and chasing work elsewhere instead.
Schlumberger said it expects an increase in U.S. onshore activity in the second quarter that will level off during the second half. But international activity is poised to continue ramping up through the end of this year and beyond.
Sales are expected to grow by mid-single digits this quarter, while operating margins probably will expand by as much a percentage point, Chief Financial Officer Stephane Biguet said during the call.
The shares, which have climbed more than 50% in the past year, rose 1.9% to $25.73 at 10:58 a.m. in New York.
Le Peuch has cut tens of thousands of workers, reshuffled the company’s business around the globe and sold off assets in North America in order to focus on overseas work. The service provider expects to generate about 80% of sales from international markets.
The company continues to work on a pair of asset sales, including drilling rigs in the Middle East and a business in Canada that shares in the ownership of wells, Le Peuch said.
The first-quarter results reflect Schlumberger’s shifting strategy, with its lowest North American sales output since the start of the shale boom roughly a decade ago. While a seasonal drop in international revenue from the fourth quarter to the first quarter is typical, Schlumberger said the 3% sequential drop during the quarter was its shallowest since 2008.
Meanwhile, Halliburton CEO Jeff Miller told investors on Wednesday that early signs of an international recovery are already showing up in orders for tools.
“These signs give us greater conviction that the second half of this year will see a low double-digit increase in international activity year-on-year,” Miller said. “We believe the international markets will experience multiple years of growth.”