Schlumberger CEO Says Slowing Gas Drilling Will Hurt Business
26 Março 2012 - 11:58AM
Dow Jones News
Schlumberger Ltd.'s (SLB) North American business will suffer
the effects of a slowdown in gas drilling, as well as the increased
cost of shifting rigs to oil-rich areas, Chief Executive Paal
Kibsgaard said Monday.
Over the past two quarters, "hydraulic fracturing pricing is
starting to come under pressure and that this represents an element
of uncertainty to our 2012 outlook," Kibsgaard said at the Howard
Weil energy conference, according to prepared remarks posted on
Schlumberger's website.
Kibsgaard added that during the first quarter, the downward
pricing trend seen in natural gas basins has seeped over into
oil-rich basins too. Also, the constant move of drilling rigs and
hydraulic fracturing capacity from natural gas basins to oil-rich
basins adds costs and cuts on operational time, he said.
"Together, these factors will have an impact on our results both
in North America, and overall, in this and in the coming quarters,"
he said.
The comments by the head of the world's largest oilfield service
company come in the wake of rival Baker Hughes Inc. (BHI)'s
announcement that it was curbing its earnings outlook due to
headwinds in the North American gas market.
Until recently, oilfield service companies were riding high on a
relentless push to tap shale gas resources, but the resulting boom
in natural gas supplies, combined with unseasonably warm weather,
brought natural gas prices to 10-year lows. Now oil and gas
companies are starting to pull back, and redirect their efforts to
oil-rich areas, but the transition is having an impact on
profits.
Kibsgaard said that natural gas drilling activity "is unlikely
to recover in the short term." Globally, however, Japan's embrace
of liquefied natural gas in the wake of its nuclear crisis has
helped boost LNG prices, and will likely spur further investment,
he said.
Kibsgaard said that he maintains a "very positive view" for the
oilfield services industry in the medium term, as companies are
spending increasingly large amounts of money to keep up with demand
for oil. In the past 10 years, exploration and production spending
has grown fourfold while oil production is up only 11%, he said.
Brent crude oil prices have been consistently above $100 per barrel
for more than one year and are "unlikely to lower significantly in
the short to medium term," he said.
Those prices, however, have helped launch a new wave of
exploration, which is critical to maintain production growth.
"Following years of under-investment in exploration, we have
seen the start of a new exploration cycle in the last year, and
based on the recent growth in net acreage held by our customers,
this trend is likely to continue," he said.
The executive also said that currently the risk of a return to
recession seems low.
"At present, the main risk of a global double-dip recession
appears to be behind us," Kibsgaard said.
-By Angel Gonzalez, Dow Jones Newswires;
713-547-9214;angel.gonzalez@dowjones.com
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