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U.S. oilfield service majors had a good run after the pandemic lockdowns ended. Demand for oil rebounded strongly, drillers drilled more, and even the climate-focused energy policies of the Biden administration could not ruin that. Now, a price rout that has already prompted the E&P segment to issue warning after warning is putting the good run on an extended pause.
All of the majors reported lower earnings for the first quarter—yet more evidence that the lower prices have started to cause some real financial pain in the oilfield services sector. As producers begin to revise their production growth plans for the year—which most of them did at the release of their first-quarter results—the effects of that revision will bite oilfield service providers.
Baker Hughes posted a 27% drop in net profits for the first quarter, to $509 million, and warned about “broader macro and trade policy uncertainty,” meaning tariffs and the oft-cited risk of a global slowdown as a result of these tariffs. But now OPEC+ is also pumping more—much more than it said it would—and this additional supply is making things even worse for producers.
Schlumberger also had a word of warning at the release of its first-quarter figures, which featured a more modest net earnings decline of 4% from a year ago but a 22% decline from a quarter earlier. Schlumberger’s CEO said, “The industry may experience a potential shift of priorities driven by changes in the global economy, fluctuating commodity prices and evolving tariffs — all of which could impact upstream oil and gas investment and, in turn, affect demand for our products and services.”
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Halliburton sounded the same alarm when it reported first-quarter performance, especially worried about the possibility that tariffs would lead to a surge in the price of oilfield services equipment—something that producers also worried about earlier this year when President Trump launched his trade policy offensive. Yet it seems the primary concern of the oilfield services sector is the price of crude.
“With oil prices falling out of the well-defined range that had persisted for much of the past 2+ years, producer budgets are encountering meaningful strain for the first time in several years,” analysts from Raymond James said, as quoted by Reuters recently.
Indeed, while there is a debate about the severity of price decline that U.S. shale drillers could endure without shrinking activity, Dallas Fed survey data and Baker Hughes’ weekly rig count reports suggest that West Texas Intermediate below $65 begins to affect activity and the lower it goes, the more severe the impact on drillers, and, by extension, oilfield service providers.