SLB, the world’s largest oilfield services provider, has issued a warning that due to declining commodity prices, clients are adopting a cautious approach, resulting in a slowdown of spending growth among oil exploration companies in recent months.
The company plays a crucial role in assisting clients with drilling wells and mapping underground oil reserves. In a recent earnings report, SLB informed investors that despite the cautious stance of many clients, they anticipate shareholder returns will exceed the target of $3 billion this year, as most projects are currently underway.
For the third quarter, SLB reported earnings of 89 cents per share, matching analysts’ expectations, while revenue reached $9.16 billion, falling short of forecasts.
Olivier Le Peuch, SLB’s CEO, remarked in the earnings statement, “While some customers are taking a more cautious approach to recent capital expenditure and discretionary spending amid falling commodity prices, most projects are proceeding as planned.” He further noted, “Despite the impacts of the macro environment that have tempered upstream spending growth over the past few months, we still expect upstream investment to remain at sustainable levels in the coming years.”
As a leader in the oil and gas industry, SLB’s global footprint serves as a barometer of the financial health of the energy sector. Competitors such as Baker Hughes and Halliburton are expected to release their performance results in the coming weeks.
The slowdown in U.S. shale oil activity can be attributed to industry consolidation, low natural gas prices, and pressures to keep spending down while returning profits to shareholders. As a result, major oilfield service companies are shifting more of their business focus to international and offshore fields. According to data from Evercore ISI, international spending by oil exploration companies is projected to rise by 5% this year, while expenditure in the U.S. and Canada is expected to decline by 3%.
