Investment in the US shale oil industry continues to fall, production growth is slowing and the balance of spending is shifting to other parts of the world, the oilfield services group Schlumberger has said. Paal Kibsgaard, chief executive, said he “the higher cost of capital, lower borrowing capacity, and investors looking for increased returns” in the US shale industry would mean that exploration and production companies would have to limit spending on new wells to what they could cover from their cash flows, cutting total expenditure by about 10 percent. In the rest of the world, however, investment is picking up, and is expected to rise by about 7-8 percent this year, the company thinks.
Mr Kibsgaard was speaking as Schlumberger, which is the world’s largest listed oilfield services group, reported earnings per share of 30 cents for the first quarter of 2019, in line with analysts’ expectations but down 21 percent from the equivalent period of 2018. Revenues were slightly higher than expected, up 1 percent at $7.88bn. The results reflect the broader trends in the oil and gas industry, with the exploration and production companies that are Schlumberger’s customers shifting their focus away from US shale and towards offshore reserves and other resources around the world.
The shift comes as some of the world’s largest oil companies, including ExxonMobil and Chevron of the US, are committing heavily to shale production, as seen in Chevron’s agreed $5obn deal to buy Anadarko Petroleum. Those commitments in the US are not enough to outweigh the general trend in the worldwide industry, however. Mr Kibsgaard said the drop-off in investment in US shale reflected a move for the industry “toward a more sustainable financial stewardship of the global resource base”, and companies use less debt finance to support their drilling programmes.
He added: “Directionally, this means that higher investments in the international markets are required simply to keep production flat, while North America land is set for lower investments with a likely downward adjustment to the current production growth outlook.” US oil production grew by a 1.6m barrels a day last year, and the government’s Energy Information Administration has forecast a further increase of 1.4m b/d this year.