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The increasing need for energy security and diverse sources of supply has triggered a “durable” growth pattern for the oilfield services industry, said Schlumberger chief executive Olivier Le Peuch.
During the company’s third quarter earnings call, Le Peuch said the recognition of many nations of the importance of energy security will drive an “urgent increase” in spending in the sector, largely in oil and gas.
“A significant step-up in investment is required,” he said. “We expect investment growth will be durable, reinforced by the long-term demand trajectory, multi-capacity expansion plans, lower operating breakeven price and supportive commodity prices.”
Le Peuch said the company anticipates demand for its services will continue to increase for at least the next several quarters.
“Growth will be simultaneous in North America and in international markets. This started first in North America and we are already witnessing the next phase of growth with an acceleration in pace in the offshore and international markets that was very visible in the third quarter,” he said.
Le Peuch said he expects investment in offshore oil and gas production to increase worldwide, with a significant push in production in the Middle East. The decline in breakeven prices for many deepwater offshore projects, he said, will help increase exploration and production activity.
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“(Lower breakeven prices) are set to support a very strong offshore environment,” he said. “For oil and in the gas environment, obviously, and this is very visible both in deep-water and in the Middle East. Middle East will have one of the highest growth in offshore environment with more than 30 rigs.”
The Middle East, Le Peuch said, should be the next market to see increased capital spending on oil and gas exploration and production.
The spending growth first seen in North America has spread to other regions, he said, with producers looking to be “fit and focused” with new technologies helping increase production.
“The Middle East is the next leg of growth internationally,” Le Peuch said. “In two years or three years, the Middle East will benefit from the largest investment cycle that we have seen.”
Schlumberger reported net income of $907 million in the third quarter of 2022, an increase of 65% over the same period a year ago. Net revenues were up 28% to nearly $7.5 billion.
“Sequentially, we delivered another quarter of double-digit revenue growth and margin expansion, as the pace of growth in our international business stepped up significantly, complementing already robust levels of activity in North America,” Le Peuch said.
He added Schlumberger has dealt with the effects of inflation and supply chain disruptions, but the overall outlook for the oil and gas industry remained strongly positive.
“While concerns remain over the broader economic climate, the energy industry fundamentals continue to be very constructive. Against the backdrop of the energy crisis and limited spare global capacity, the world faces an urgent need for increased investment to rebalance markets, create supply redundancies, and rebuild spare capacity,” he said.
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