North American Oilfield Services: Navigating a Shifting Landscape

Current Market Trends

Rig count trends, strategic focus on Production and Recovery, fleet attrition, and the growth potential in carbon capture are key current market trends in North American oilfield services, driven by oil price expectations, resilient OpEx spending, and emerging technologies.

"Rig count trends are driven by the exploration and development spending by oil and natural gas companies, which in turn is influenced by current and future price expectations for oil and natural gas." --- (BKR, sec filing, 2024/Q1)

"Now, looking at the priorities for producing assets today and tomorrow, we recognize the need to increase our exposure to the Production and Recovery market, including the more resilient OpEx spend, as operators work to offset natural decline, extend performance, and maximize the value of their assets." --- (SLB, earning call, 2024/Q1)

"And I expect it will drive market growth '25 and beyond. And I think what's overlooked, look through the current timing and look forward to what's coming, attrition has really shrunk the fleet." --- (HAL, earning call, 2024/Q1)

"In OFSE, on the back of slowing global demand growth and ongoing economic uncertainty, the recent Organization of the Petroleum Exporting Countries production cut extension, coupled with rising geopolitical risks and firming oil demand in June 2024 have helped to keep global oil markets more balanced." --- (BKR, sec filing, 2024/Q2)

"I think we see this as a very attractive market for us considering the adjacency on the sequestration and considering the integration capability we have acquired and the technology we have acquired through Aker Carbon Capture. So the market independently and at this point, we see this market growing at more than 50% a year." --- (SLB, earning call, 2024/Q2)

Regulatory and Environmental Policies

North American oilfield services companies are increasingly focused on regulatory compliance and environmental sustainability. SLB emphasizes the challenges of achieving net-negative carbon emissions and the importance of regulatory approvals, while BKR highlights the transformative potential of ESG factors and the need for low-emission solutions.

"These statements are subject to risks and uncertainties, including, but not limited to, the inability to achieve net-negative carbon emissions goals; the inability to recognize intended benefits of SLB's strategies, initiatives or partnerships; legislative and regulatory initiatives addressing environmental concerns, including initiatives addressing the impact of global climate change; the timing or receipt of regulatory approvals and permits; and other risks and uncertainties detailed in SLB's most recent Forms 10-K, 10-Q and 8-K filed with or furnished to the U.S. Securities and Exchange Commission." --- (SLB, press release, 2024/07/02)

"We view the area of environmental, social, and governance as a key lever to transform the performance of our Company and our industry." --- (BKR, sec filing, 2024/Q1)

"These statements are subject to risks and uncertainties, including, but not limited to, the inability to achieve net-negative carbon emissions goals; the inability to recognize intended benefits of SLB's strategies, initiatives or partnerships; legislative and regulatory initiatives addressing environmental concerns, including initiatives addressing the impact of global climate change; the timing or receipt of regulatory approvals and permits; and other risks and uncertainties detailed in SLB's most recent Forms 10-K, 10-Q and 8-K filed with or furnished to the U.S. Securities and Exchange Commission." --- (SLB, press release, 2024/05/02)

"As such, we remain focused on delivering innovative, low-emission, and cost-effective solutions that deliver step changes in operating and economic performance for our customers. Environmental, Social and Governance" --- (BKR, sec filing, 2024/Q2)

"The integration of zero-flaring technology in Production ExPRESS solutions aids in compliance with regulatory requirements and reduces the environmental impact of production facilities." --- (SLB, press release, 2024/04/19)

Financial Performance

Baker Hughes and Schlumberger are showing strong financial performance, with Baker Hughes reporting an increase in Remaining Performance Obligations to $33.5 billion and structural changes enhancing financial outcomes. Schlumberger anticipates meeting its financial goals, driven by robust division results and strategic acquisitions.

"Other Financial Items Remaining Performance Obligations ("RPO") in the second quarter ended at $33.5 billion, an increase of $0.8 billion from the first quarter of 2024." --- (BKR, press release, 2024/07/25)

"And third, after a strong start to 2024 and with clear visibility into the year ahead, we look forward to achieving our full year financial ambitions and commitments to shareholders return." --- (SLB, earning call, 2024/Q1)

"Remaining Performance Obligations ("RPO"): As of March 31, 2024, the aggregate amount of the transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligations was $32.7 billion." --- (BKR, sec filing, 2024/Q1)

"We have many solutions to help customers access resource to our production system and reservoir performance division, and this is showing up in the strong results these divisions are achieving. As this market continue to evolve, we expect to strengthen our portfolio to fully capture this growing opportunity through our pending acquisition of ChampionX. Finally, underpinning nearly everything we do is the power of digital and AI." --- (SLB, earning call, 2024/Q2)

"The structural changes we are making to the business are increasingly visible in our financial performance and provide a clear path to our upgraded guidance range." --- (BKR, earning call, 2024/Q2)

Competitive Landscape

SLB leverages its strong company culture and global reach as competitive advantages, while Baker Hughes focuses on a distinctive, service-oriented approach with significant opportunities for aftermarket services and upgrades, positioning both companies uniquely in the North American oilfield services market.

"We view this culture as a competitive advantage and I am grateful for all their hard work and they inspire me every day. Finally, I'm confident that our talented employees will remain wholly dedicated to this purpose and that they will benefit from greater opportunities as part of SLB's global reach." --- (SLB, M&A Announcement, 2024/04/02)

"So it is a very distinctive and it's more razor blade type of approach. And in fact, if you look at that business, it's got a great aftermarket and it's got a great installed base of assets between the compressors, the pumps, the turbines that has a huge historical opportunity for us to mine new service opportunities and also provide upgrades as we go forward within the energy landscape." --- (BKR, conference, 2024/06/18)

Future Outlook

The future outlook for North American oilfield services is positive, with SLB anticipating more work and bookings, HAL maintaining consistent expectations, and BKR projecting growth at a slower pace.

"More work into the future, more bookings in the future, and I think a very key and regional market for us, as we are very exposed to that" --- (SLB, earning call, 2024/Q2)

"As I look ahead for the remainder of this year, my outlook today is consistent with our expectations at the start of the year." --- (HAL, earning call, 2024/Q2)

"There's several good prospects. I would look at it from a standpoint of growth in the future at a slower pace, so positive, but again decelerating as we go forward." --- (BKR, earning call, 2024/Q2)

Potential Challenges

Energy providers in North American oilfield services face the complex challenge of delivering secure, sustainable, and affordable energy amid rising demand, while also navigating strategic deals aimed at enhancing resource recovery in U.S. Shale reservoirs.

"Energy providers face the multifaceted challenge of providing secure, sustainable and affordable energy against the backdrop of increasing energy demand." --- (BKR, earning call, 2024/Q1)

"A lot of these deals have been motivated by the potential for majors to increase resource recovery, particularly in U. S. Shale reservoirs." --- (SLB, event transcript, M&A Announcement, 2024/04/02)

Customer Demand and Market Needs

Customer demand in North American oilfield services is driven by the need for advanced technologies and increased efficiency, as highlighted by Halliburton's e-fleet strategy and Baker Hughes' capacity expansion. Schlumberger emphasizes complementary offerings, while Baker Hughes also focuses on infrastructure to meet rising energy demands.

"Jeffrey Miller: No. Look, this is a market push. The whole strategy behind e-fleet for us has been build the best technologies and clients demand it, and we've built to the demand that we see in hand, and therefore, they are not built on spec, they are built for customers that plan to use them." --- (HAL, earning call, 2024/Q1)

"This view, supported by customer dialogue and our internal LNG demand expectations would result in our installed capacity increasing by 70%." --- (BKR, earning call, 2024/Q1)

"I think indeed there is an ESP market and the ESP offering that is not the same as our offering and I think will be placed with customers in a different way and could then will be remained complementary highly complementary." --- (SLB, M&A Announcement, 2024/04/02)

"It's pretty clear, this is a big step change in efficiency for your customer, and demand seems to be exceeding supply at least for the next couple of years, but I guess, the question is what prevents the industry from building out?" --- (HAL, earning call, 2024/Q1)

"All of this enables our ability to help customers both in the industrial space as well as the energy space to transition and also to build the infrastructure they need for what is increasing energy demand." --- (BKR, conference, 2024/06/18)

Innovation and R&D

North American oilfield services companies are prioritizing innovation and R&D to enhance capital efficiency, optimize supply chains, and drive higher margins. Halliburton, Baker Hughes, and Schlumberger emphasize the importance of technology investments and innovation to improve production operations and achieve better returns.

"But at the same time, that's been a practice in all of our business. And so, anything that we're producing today, sort of its first criteria has to be improved capital efficiency and better returns out of R&D." --- (HAL, earning call, 2024/Q1)

"In addition, there is a cultural shift to focus more on value over volume. With these foundational elements in place alongside the opportunities for better R&D absorption, supply chain optimization and execution of higher-margin backlog, we remain confident in achieving 20% margins for the segment." --- (BKR, earning call, 2024/Q1)

"The combination of ChampionX's strong production-focused leadership throughout North America and beyond with our own international presence, unmatched technology portfolio, and history of innovation will drive tremendous value for our customers and stakeholders." --- (SLB, press release, 2024/04/02)

"Solid margin improvement in both Industrial Tech and Gas Tech Equipment were partially offset by higher R&D spend related to our new energy investments and continued supply chain tightness in Gas Tech Services." --- (BKR, earning call, 2024/Q1)

"I think we have been -- as we prepared our core strategy a few years back, we identified that production recovery in particular production chemicals, reservoir chemicals, and lift solutions will be a domain where we need to invest in technology, and we need to explore opportunity to accelerate our market participation because we believe two things: we believe first, that this market will benefit from further innovation, from further integration, from further disruption, and hence create through OpEx, the efficiency gains into production operations, into recovery." --- (SLB, earning call, 2024/Q1)