Learn more about Hart Energy Conferences
Get our latest conference schedules, updates and insights straight to your inbox.
Despite double-digit revenue declines in just about all parts of the world, Schlumberger (NYSE: SLB) is still adding to its technological arsenal with new drilling and hydraulic fracturing systems in the works while investing in niche technologies and multiclient seismic surveys.
Hopes are that its offerings coupled with a broader global reach and other strategic moves will create the leverage needed to grow revenue market share among other goals, according to Schlumberger executives speaking during an April 22 conference call on the company’s first-quarter 2016 results.
“So far in this downturn, we have closed our largest ever acquisition, made a series of smaller but still significant investments in specific technology niches, and invested in integrated services and projects that will boost our financial performance going forward,” Schlumberger CEO Paal Kibsgaard said April during the conference call.
But if all goes as planned, in 2017 Schlumberger will have also produced a new hydraulic fracturing system, which Kibsgaard said will “span the complete range of surface components, such as Cameron’s CAMSHALE pressure control and wellhead systems together with our own perforating, fracturing, cleanup, and flowback services, as well as our latest downhole completion technology and fracturing fluids.” Plus, with newly acquired Cameron International Corp.—following the merger’s closure April 1—Schlumberger plans to have its “land drilling system of the future” available commercially.
The system will integrate purpose-built surface and downhole hardware into a drilling system managed by optimized software, targeting operational efficiency gains. The system, Kibsgaard said, will draw on the rig design acquisition and rig manufacturing joint venture made in 2015. Plans include having five engineering prototypes of the new system ready for field testing in Ecuador this year.
Schlumberger’s continued drive comes as the oil and gas market endures tough times—low commodity prices brought on by a supply-demand imbalance that has, in turn, sucked dollars from profit margins and hundreds of thousands of jobs off payrolls and driven most, if not all, to seek the benefits of technology.
First-quarter 2016 revenue plummeted 36% year-on-year for Schlumberger to $6.5 billion. The figure was down 16% from the previous quarter. In North America, operating expenses came in higher than the cost of goods sold, sending the company’s pretax operating income into negative territory as the its overall headcount shrunk by 8,000 in the first quarter.
Schlumberger also shaved $400 million off its initial capex guidance. The budget is now about $2 billion, which includes funds for the two new systems.
“Our ability to invest through this unprecedented industry downturn on the back of our strong cash flow and balance sheet enables us to capitalize on the current market conditions to gain significant relative strength compared to our surroundings,” Kibsgaard said.
Other investment areas highlighted by Kibsgaard include:
- Multiclient seismic surveys. Focus is currently on Mexico’s Campeche Basin and offshore Mozambique and South Africa. Schlumberger currently has eight 3-D vessels active;
- Production management. Schlumberger Production Management (SPM) continues work to rejuvenate the Shushufindi oil field in Ecuador and has started a new SPM project at the Auca Field, also in Ecuador, and
- M&A investment. In addition to completing its nearly $15 billion Cameron deal, Schlumberger acquired two U.K.-based companies in first-quarter 2016—the Meta Downhole Ltd. engineering and service company that offers downhole metal-to-metal isolation technology in well integrity applications and Asset Development & Improvement Ltd., an oil and gas consultancy. The acquisitions were announced in March.
But attention on investment does not mean Schlumberger as changed its view of the oil markets.
The company expects market conditions to worsen in the second quarter, Kibsgaard said. However, for what it’s worth, he added that E&P investment cuts are already so severe that they can “only accelerate production decline and the consequent upward movement in oil price.”
Kibsgaard added, “We remain convinced that the tightening of the supply (and) demand balance is well underway. And while the operating environment remains tough, the market presents a range of opportunities which we will continue to actively pursue.”
Velda Addison can be reached at vaddison@hartenergy.com.
Recommended Reading
CorEnergy Infrastructure to Reorganize in Pre-packaged Bankruptcy
2024-02-26 - CorEnergy, coming off a January sale of its MoGas and Omega pipeline and gathering systems, filed for bankruptcy protect after reaching an agreement with most of its debtors.
Enerflex Appoints Thomas B. Tyree to Board
2024-03-12 - Tyree currently serves on Antero Resources’ board and recently served as chairman of Northwoods Energy LLC in 2023.
SolarEdge to Restructure, Reduce Workforce
2024-01-22 - SolarEdge’s plans to restructure the company and cut 16% of its global workforce are in response to “current market dynamics.”
Reactive Downhole Tools Appoints COO, CTO
2024-02-14 - Reactive Downhole Tools is also developing a new R&D test center in Abu Dhabi.
From Restructuring to Reinvention, Weatherford Upbeat on Upcycle
2024-02-11 - Weatherford CEO Girish Saligram charts course for growth as the company looks to enter the third year of what appears to be a long upcycle.