As the US shale boom sent the country’s crude production soaring over the past decade, the oilfield services companies that do everything from drilling producers’ wells and laying pipes to maintaining roads and operating software reaped big rewards. But with the worst price crash in decades wreaking havoc on a sector that has booked tens of billions of dollars in writedowns over the past year, they are looking to turn away from the country in the clearest sign yet that the shale patch’s glory days may be over.
“North America is going to be a changed market moving forward,” said Lance Loeffler, chief financial officer at one of the biggest services groups, Halliburton. “Our view is that the international markets will take share back from a supply perspective … and we need to be prepared for that .” As the pandemic sapped demand and prices plunged in recent months, listed US oil producers slashed their capital expenditure by about 50 per cent, according to Goldman Sachs. Most of that would have been spent on work carried out by oilfield services groups, whose revenues collapsed.
The big three service providers – Schlumberger, Halliburton and Baker Hughes, which have a combined market capitalization of $55bn – have taken write-downs of almost $45bn over the past year. And even as activity picks up, they are planning for a significantly leaner future.
The US – whose high-cost shale industry has been particularly badly hit by the price crash – has been at the heart of their efforts to cut costs and offload assets. Schlumberger, the biggest services group, said last week it had closed 150 North American facilities, while Halliburton said it had got rid of 100.
“They are having to right-size considerably … not only due to the implosion inactivity but their belief that, effectively, the size of the industry and the rate of growth going forward in the United States is going to be considerably slower,” said Bill Herbert, an analyst at Simmons. Global spending on oilfield services is set to slide by a quarter this year to
$46obn, according to consultancy Rystad Energy – worse than the 20 per cent hit it took in the last downturn between 2014 and 2016. The slump will be greatest in North America, where shale drilling has dried up.