The Zhitong Finance App learned that the world's leading oil service companies will release financial reports one after another this week, and the impact on performance caused by Iran's geographical conflict will be clearly evident. The market expects the net profit of SLB.US (SLB.US), Baker Hughes (BKR.US), and Halliburton (HAL.US) to decline.
Halliburton will kick off the industry earnings season on Tuesday, and analysts on average expect the company's earnings per share to drop 2%. Later this week, Schlumberger is expected to report a 31% decline in earnings per share, which will be the biggest drop since the last three months of 2020. Baker Hughes will release earnings on Sunday, and earnings per share are expected to drop 21%. Schlumberger and Baker Hughes have significant business exposure in the Middle East.
April to June was the first full quarter after the escalation of the war between the US and Israel against Iran, and production in many countries, including Iraq, Qatar, and Kuwait, was restricted or completely stopped. Despite recent increases in production activity in the US, companies such as Weatherford International (WFRD.US) and Halliburton are expected to be more affected in the second quarter as they continue to face disruptions in operations and uncertain recovery times.
Scott Gruber, an analyst at Citigroup Global Finance, said investors and analysts will focus on the future development prospects of the Middle East region, the rate at which global oil field activity will resume in 2027, and which regions will become the core drivers of the industry's growth.
Gruber said, “North American operators, especially private operators, are expanding the scale of mining, and the volume of oil field operations in Latin America, Europe and Africa is rising at the same time. As a result, the overall oilfield services market is improving, with the exception of the Middle East.”
US drilling activity has picked up after months of sluggishness, helping to offset the weakness in the Middle East. The rise in oil prices prompted producers to add about 46 drilling platforms from a low level in December last year, and the wages of oil field workers also rose to a record high.
US drilling activity picks up
James West, an energy analyst at Melius Research, said that some Middle East oil fields are resuming production faster than expected, and investors are eager to understand changes in local conditions, even though the current situation is still difficult to predict. “We need to understand the real situation on the frontline of the resumption of production in the Middle East: the current state of oil reserves, the level of production capacity recovery, and the time required to fully resume production.”
At the same time, he mentioned that the overall capital expenditure of shale oil companies is still cautious, even though stronger oil prices may push the company to raise the capital budget to the upper limit of the guideline range in order to increase profits.
West said, “Compared to the previous quarter, oil service companies are likely to feel a marginal recovery in market demand, increased industry consultation orders and business negotiations, and tighter supply of oil service equipment and manpower.”
Gruber said that the resilience of the oilfield service industry remains the focus of investors' attention. They hope management can show confidence in the future beyond 2026. “Investors want to see the industry develop a continuous growth trend.”
Part of the resilience of the industry stems from expanding data center infrastructure and energy support services, and the business is becoming an emerging growth point for the oil service sector. “Laying out this track is a logical transformation direction for the industry,” West said.
He added, “If natural gas becomes an important source of electricity for many data centers, petroleum service companies have a natural advantage in setting up related supporting businesses.”