Oilfield service companies continue to expand in international and offshore markets as the North American market softens, top executives said during second quarter earnings calls over the last week.
And that’s fine with Olivier Le Peuch, CEO of SLB, whose company is positioned for it.
“This is playing to the strengths of our business, as international revenue represents nearly 80% of our global portfolio, and offshore comprises nearly half of that,” he told analysts.
The investment momentum is accelerating internationally, Le Peuch said. SLB anticipates more than $500 billion in global final investment decisions (FIDs) between 2022 and 2025, with more than $200 billion of that total in the deepwater sector.
But even in the short term, SLB benefits from deriving 78% of its revenue outside of North America.
“About half of SLB’s international markets posted year-over-year growth exceeding 30%, led by the Middle East and Asia,” Morningstar analyst Katherine Olexa wrote in a research note. “We expect SLB will continue to benefit from elevated demand and favorable operating dynamics through at least year-end.”
SLB’s second-quarter revenues of $8.1 billion beat its first quarter by 5% and second quarter 2022 by 20%. Quarterly net income of $1.03 billion was up 11% sequentially and 8% year-over-year. Its stock price is up 6.5% year-to-date, compared to the S&P Oil & Gas Exploration & Production Select Industry Index, which is flat for 2023.
Oil price rebound
Baker Hughes, reliant on international work for 73% of its revenues, saw its second quarter revenue rise 10% sequentially to $6.3 billion, which was a 25% increase year-over-year. Net income fell 29% sequentially to $410 million, but that total was much improved over the $839 million loss in second-quarter 2022.
International revenue in the quarter rose 23% year-over-year, compared to 13% for North America. Sequentially, it was up 10%, compared to 5% for North America.
“Despite lower oil prices over the first-half of the year, we maintain a constructive outlook for global upstream spending in 2023,” Lorenzo Simonelli, chairman and CEO, said during the call. “Market softness in North America is expected to be more than offset by strength in international and offshore markets.”
The company’s stock price is up 21% year-to-date and has jumped 13% since the start of July. Wells Fargo raised its price target to $37/share from $32/share in a July 19 research note and noted that it was “fairly bullish” on an oil price recovery in 2024.
By contrast, international revenues only account for 54% of Halliburton’s total. Total revenues rose 2.1% sequentially in the quarter, despite a 2.5% dip in North America. International earnings were up 6.5%.
Wells Fargo noted that shares fell following the earnings announcement and a lukewarm outlook in North America for the rest of the year. The stock price is down 2.8% year-to-date.
Net income slipped 6% to $616 million from the first quarter, but was far above the $117 million recorded in second-quarter 2022.
The quarterly picture brightens in the year-over-year comparison. Total revenue of $5.8 billion was up 14% year-over-year. International revenue was up 17%, with North America rising 11%. The company expects international spending to increase between 15% and 20% for 2023, with North American growth about 10%.
“Equally important, in addition to strong growth in the Middle East and Latin America, we see steady growth in activity across the globe,” said Jeff Miller, Halliburton’s chairman, president and CEO.
Wells Fargo was optimistic on the company’s outlook.
“Macro fundamentals remain robust for HAL, particularly in international and offshore markets,” analysts said in a July 19 report. “Global service capacity remains tight, which should allow for greater pricing power and further revenue/margin improvements.”
2023-09-29 - Analysts said some measures show capex spending might be significantly underfunded and that “critical amounts of investment” are needed.
2023-09-28 - SM Energy Co.’s board of directors approved a quarterly cash dividend of $0.15 per share of common stock outstanding.
2023-09-28 - Net proceeds from the offering are expected to be used to fund a portion of the aggregate purchase price for Western Midstream’s pending $885 million acquisition of Meritage Midstream Services II LLC.
2023-09-27 - Ovintiv received approval from the Toronto Stock Exchanged to purchase up to 26.7 million common shares, or about 10% of its public float, over a 12-month period.
2023-09-27 - Proceeds from the notes offering will be used to pay down existing debt, Sitio Royalties said.