SLB Bullish on Oil, Natural Gas Growth Following Boffo Quarterly Performance

An uptick in global offshore development, combined with expansion of natural gas opportunities overseas, bode well for SLB Ltd. to improve activity in 2023, CEO Olivier Le Peuch said Friday. 

All signs point in a positive direction, Le Peuch said, after the world’s No. 1 oilfield services (OFS) operator closed out a “remarkable year.” He joined his executive team in a conference call to discuss quarterly and 2022 performance, as well as the year ahead.

“All divisions and geographical areas,” outperformed in 2022, Le Peuch told investors. The year also ended with “robust” sales for digital offerings, and “particularly strong service activity offshore and in the Middle East, where we witnessed a significant inflection as capacity expansion projects mobilized.”

SLB was the first major OFS operator to issue fourth quarter and full-year results. Baker Hughes Co. and Halliburton Co. are next to report their earnings.

Carpe Diem In North America

North America once again proved a bellwether, as SLB “seized the growth cycle throughout the year,” Le Peuch said. “We effectively harnessed our refocused portfolio, fit-for-basin technology and performance differentiation to gain greater market access and improved pricing, particularly in the drilling markets where we significantly outperformed rig count growth.”

The final three months of 2022 “affirmed a distinctive new phase in the upcycle.” 

In the United States, the land rig count “remains at robust levels, although the pace of growth is moderating…Additionally, pricing continues to trend favorably, extending beyond North America and into the international regions, supported by new technology and very tight equipment and service capacity in certain markets.”

Most exploration and production customers by mid-2022 had again prioritized oil and gas development over energy transition activities after Russia invaded Ukraine.

“The macro backdrop and market fundamentals that underpin a strong multi-year upcycle for energy remain very compelling in oil and gas and in low-carbon energy resources,” Le Peuch said. 

Citing an oil and gas demand forecast by the International Energy Agency, global consumption is set “to grow by 1.9 million b/d in 2023, despite concerns for a potential economic slowdown in certain regions…In parallel, markets remain very tightly supplied.”

[Want today’s Henry Hub, Houston Ship Channel and Chicago Citygate prices? Check out NGI’s daily natural gas price snapshot now.]

‘Sense Of Urgency’ For Energy Security

Energy security has prompted “a sense of urgency to make further investments to ensure capacity expansion and diversity of supply,” he said. Global upstream spending forecasts also continue to trend “positively…Activity growth is expected to be broad-based, marked by an acceleration in international basins.

“These positive activity dynamics will be amplified by higher service pricing and tighter service sector capacity. The impact of loosening Covid-19 restrictions, and an earlier-than-expected reopening of China, could support further upside potential over 2023.”

SLB rebranded last October from its old-line identity as Schlumberger Ltd. to affirm an evolving focus by “driving energy innovation for a balanced planet,” Le Peuch said at the time. The company scored “significant progress in our sustainability initiatives during the year,” and gained traction with the Transition Technologies portfolio. The portfolio, which supports opportunities to decarbonize oil and gas, is projected to “cross the $1 billion revenue mark in 2023,” he told investors.

Although traditional OFS sales remain strong, the “secular trends of digital and decarbonization are set to accelerate, with significant digital technology advancements, favorable government policy support and increased spending on low-carbon initiatives and resources.”

For example, in the Permian Basin’s Midland formation in West Texas, Pioneer Natural Resources Co. “successfully deployed novel SLB cement-free slurry technology on an 18-well field testing campaign,” the company noted. “This pilot in North America resulted in the complete elimination of Portland cement from slurry designs, offering a unique opportunity for the oilfield industry to substantially decrease carbon dioxide emissions related to well construction.” The field trials “validated” the technology which is set to become available to customers later this year.

Net earnings in the final three months of 2022 climbed 77% year/year to $1.07 billion (74 cents/share) from $601 million (42 cents). Revenue rose 27% from 4Q2021 to $7.9 billion. 

Profits in 2022 soared by 83% from 2021 to $3.44 billion ($2.39/share) from $1.88 billion ($1.32). Revenue was 23% higher than in 2021 at $28 billion. 

The board also approved a 43% increase in the quarterly cash dividend to 25 cents/share.