Oil Servicers Reap Benefits From Downsizing in Crude Crash

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The world’s two largest oilfield service providers shrugged off a yearlong crude market crash with better-than-expected quarterly results in North America, helped by aggressive cost cuts from downsizing.

Halliburton Co., the second-largest provider of services such as drilling and completion work to oil producers, earned 44 cents a share in the second quarter, excluding certain items, beating the 29-cent average estimate of analysts, according to a statement Monday. Schlumberger Ltd., the world’s No. 1, beat the 79-cent average estimate with results reported July 17.

“They both beat on controlling costs,” said Rob Desai, an analyst at Edward Jones in St. Louis, who rates both companies a buy and does not own shares in either. “They’re one of the first to really have the workforce reductions.”

Baker Hughes Inc. Tuesday reported a net loss of 14 cents a share, excluding certain items, matching the average of 31 analysts’ estimates compiled by Bloomberg. The world’s third-largest oil services provider agreed last year to be acquired by Halliburton in a deal that hasn’t yet closed as it undergoes federal antitrust scrutiny.

Profit margins in Baker Hughes’s largest region, North America, dropped to a minus 8.5 percent, the company said Tuesday.

Scraping Bottom

North American customer spending is expected to fall by more than 35 percent this year, while international customers will cut more than 15 percent from their budgets, Schlumberger Chief Executive Officer Paal Kibsgaard said July 17 on a conference call.

Baker Hughes expects no activity increase for the rest of the year as long as commodity prices remain where they are, Chief Executive Officer Martin Craighead said Tuesday in a statement.

Halliburton executives told analysts and investors on a Monday conference call that the North American onshore market is scraping along the bottom, but said there might be a slight pickup in work this year and a more meaningful increase next year.

“This is a damn tough market, one of the toughest ones that I’ve ever been through,” Halliburton Chief Executive Officer Dave Lesar, a 62-year-old accountant who’s run the world’s largest fracking service provider since 2000, said on the call. “I don’t believe anyone on the call can accurately predict when commodity prices will rebound and rig counts will recover in the U.S. or the international markets, and neither can I.”

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