Schlumberger now sees ‘challenging’ global oil market continuing

DAVID WETHE

HOUSTON (Bloomberg) -- Three months ago, the head of Schlumberger Ltd. thought the industry had seen the worst of the U.S. oil market collapse. Now he’s not so sure.

A recovery that in July CEO Paal Kibsgaard thought might begin by the end of the year, now looks delayed, he said in a statement Thursday as Schlumberger reported a 49% drop in third-quarter profit. The market is "increasingly challenging with activity expected to be reduced further, " Kibsgaard said.

The world’s largest oilfield services provider reported that profit fell to $989 million, or 78 cents a share, from $1.95 billion in the year-ago quarter. The earnings beat by 1 cent the average of 37 analysts’ estimates compiled by Bloomberg.

Even if demand catches up to supply and prices rise in coming months, business will probably continue to decline, he said, “as lack of available cash flow exhausts capital spending for a number of our customers, leading them to take a conservative view on 2016 E&P spending in spite of any gradual improvement in oil prices.”

More to Come

Schlumberger is the first of the major energy companies to report what are widely expected to be dismal third quarter results. After crude prices fell by more than half since June 2014, the downturn is shaping up to be the most severe in decades, Kibsgaard said.

Prices for West Texas Intermediate, the U.S. benchmark crude, fell Thursday to $46.38/bbl, capping the longest streak of declines since July. Crude dropped after a government report that U.S. crude stockpiles had seen their biggest increase in six months, bolstering speculation a global surplus will persist.