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Offshore Drilling Grows as U.S. Shale Gets Left Behind


These translations are done via Google Translate

International markets are in the midst of a multiyear expansion in capital spending.

One of the primary oil themes in recent years is the US ascendancy to become the world’s largest producer. But the industry’s biggest contractors are looking elsewhere for growth.

Persistently low natural-gas prices, corporate consolidation and conservative spending plans are conspiring to shrink the once-booming market for drilling and fracking in the US shale patch, SLB Chief Executive Officer Olivier Le Peuch said Friday.

Demand for oilfield services is growing elsewhere, particularly offshore and in the Middle East. After the collapse in spending following the pandemic, international markets are in the midst of a multiyear expansion in capital expenditures.

That, according to Le Peuch, will more than offset the slump in North America, where SLB’s sales declined 6% in the first quarter.

For SLB — and peers Halliburton Co. and Baker Hughes Co., which both report earnings this week — the weakness in shale was foreseen. Post-coronavirus, companies started heeding investor calls to prioritize the return of cash instead of expanding production. The big oil-services providers pivoted overseas in search of growth.

The trend seems to be intensifying. This year has seen more US shale producers announce plans to merge, which typically means less spending with contractors.

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Shale Sputters

EIA forecasts slowdown in US shale production in 2024

Source: Energy Information Administration forecast

The services sector is also taking a hit from the slump in natural gas prices that prompted some drillers to cut production.

And to top it all off, the closely watched stock of predrilled wells, known as the fracklog, reversed course last month, indicating a further slowdown to come in the shale patch.

“We believe that, on a full-year basis, it will be more muted than we had anticipated at the beginning of the year, considering the softness of the market,” Le Peuch said of SLB’s North American business.

That underscores how the region isn’t what it used to be for the services companies — even if the US is likely to remain the dominant producer for some time to come.

–David Wethe, Bloomberg News



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