Released August 03, 2020 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Oilfield-service companies have started releasing financial results for the second quarter, and the news ranges from bad to historically awful. Bankruptcy filings are up and look to grow further. Plummeting revenue, large losses and a lot of job cuts are what the first filings from oilfield-service companies show, and there's little reason to expect the bad news won't continue to course through that segment.
Industry bellwethers Schlumberger Limited (NYSE:SLB) (Houston, Texas), Halliburton Company (NYSE:HAL) (Houston) and Baker Hughes Company (NYSE:BKR) (Houston) reported heavy losses for the second quarter:
All segments of the Oil & Gas industry have been hit hard by the one-two punch of COVID-19 cutting into demand for oil and refined products, and the price war fought by Saudi Arabia and Russia in March and April.
Oilfield service companies depend on drilling rig counts and the capital spending of drillers. Both are down sharply in an environment characterized by high uncertainty over demand, which has been eroded by the COVID-19 pandemic. Companies that supply equipment and services to drillers look like they're in for a rough summer and an uncertain fall.
"The (oilfield services) market may have hit bottom, but (bankruptcy) filings will increase for the remainder of the year," said Jeff Nichols, a partner at Haynes and Boone LLP (Dallas, Texas), a law firm with a large business in financially distressed oil and gas companies.
Several smaller oilfield service companies, including Weatherford International (Houston), Superior Energy Services (NYSE:SPN) (Houston), Key Energy Services (Houston) and Flotek Industries (NYSE:FTK) (Houston) are scheduled to report financial results in early August. Analysts don't expect a lot of bright spots when those companies report results.
Several oilfield services companies, including Basic Energy Services Incorporated (Fort Worth, Texas) and Calfrac (Calgary, Alberta) have become penny stocks, selling for less than $1 per share.
Eleven oilfield service companies have filed for Chapter 11 reorganization during the second quarter, according to the bankruptcy tracker maintained by Haynes and Boone. Companies filing in the second quarter include RWDY Incorporated (Houston), Naphtha Energy Solutions LLC (Wixon Valley, Texas), Total Oilfield Solutions LLC (Carlsbad, New Mexico) and Vista Proppants and Logistics LLC (Fort Worth).
Seven oilfield-service firms filed for Chapter 11 protection in the first quarter.
Click on the image at right to see Haynes and Boone's running total of oilfield services firms that have filed for bankruptcy protection through June 30, 2020.
"As the E&P side goes, so goes the oilfield-service sector," said Jesus Davis, Industrial Info's research specialist for North American Oil & Gas Production, Pipelines and Terminals industries. "Work has dried up, rigs are being stacked up, job cuts are soaring and it's becoming harder and harder for oilfield-service companies to access capital."
"With the U.S. rig count at a historic low of about 251, down over 60% from year-earlier levels, there's a lot of excess capacity," Davis continued. "We expect more asset sales and mergers, but the only thing that will really fix oilfield services companies is a surge in demand. No one is expecting that for the near future."
Consulting firm Deloitte (London, England) recently released its mid-year update for the overall oil & gas industry. One of the trends the firm predicted was a pickup in mergers and acquisitions.
"The (oil and gas) industry will not fully recover until COVID-19 has been successfully contained in most countries, either with the development of a vaccine or the implementation of a widespread test-and-trace program," said the Deloitte report, Midyear Outlook for The Oil and Gas Industry. "Even as the number of new cases has been reduced in the hardest-hit countries in Asia and Europe, its spread is increasing in the Americas."
"Recovery will likely require not only for the number of new COVID-19 cases to drop substantially but also for economic activity to return to its pre-virus levels," the report continued. "That includes GDP growth, as well as other oil and gas-relevant indicators, including industrial activity levels; transport demand; and demand for goods like cars, appliances and other consumer products."
On July 30, the U.S. reported second-quarter GDP fell 32.9% on an annualized basis, the worst decline in U.S. history. The same day, U.S. COVID-19 cases surpassed 4.5 million, and the death toll from the pandemic exceeded 150,000.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
Industry bellwethers Schlumberger Limited (NYSE:SLB) (Houston, Texas), Halliburton Company (NYSE:HAL) (Houston) and Baker Hughes Company (NYSE:BKR) (Houston) reported heavy losses for the second quarter:
- Schlumberger reported a net loss of $3.4 billion on sharply declining revenue of $5.4 billion. The company announced plans to reduce staffing by about 20%, or 21,000 people.
- Halliburton said quarterly revenue declined 46% compared to year-earlier results, and losses totaled $1.7 billion.
- Baker Hughes reported a 21% decline in quarterly revenue to $4.7 billion, resulting in a $355 million net loss.
All segments of the Oil & Gas industry have been hit hard by the one-two punch of COVID-19 cutting into demand for oil and refined products, and the price war fought by Saudi Arabia and Russia in March and April.
Oilfield service companies depend on drilling rig counts and the capital spending of drillers. Both are down sharply in an environment characterized by high uncertainty over demand, which has been eroded by the COVID-19 pandemic. Companies that supply equipment and services to drillers look like they're in for a rough summer and an uncertain fall.
"The (oilfield services) market may have hit bottom, but (bankruptcy) filings will increase for the remainder of the year," said Jeff Nichols, a partner at Haynes and Boone LLP (Dallas, Texas), a law firm with a large business in financially distressed oil and gas companies.
Several smaller oilfield service companies, including Weatherford International (Houston), Superior Energy Services (NYSE:SPN) (Houston), Key Energy Services (Houston) and Flotek Industries (NYSE:FTK) (Houston) are scheduled to report financial results in early August. Analysts don't expect a lot of bright spots when those companies report results.
Several oilfield services companies, including Basic Energy Services Incorporated (Fort Worth, Texas) and Calfrac (Calgary, Alberta) have become penny stocks, selling for less than $1 per share.
Eleven oilfield service companies have filed for Chapter 11 reorganization during the second quarter, according to the bankruptcy tracker maintained by Haynes and Boone. Companies filing in the second quarter include RWDY Incorporated (Houston), Naphtha Energy Solutions LLC (Wixon Valley, Texas), Total Oilfield Solutions LLC (Carlsbad, New Mexico) and Vista Proppants and Logistics LLC (Fort Worth).
Seven oilfield-service firms filed for Chapter 11 protection in the first quarter.
Click on the image at right to see Haynes and Boone's running total of oilfield services firms that have filed for bankruptcy protection through June 30, 2020."As the E&P side goes, so goes the oilfield-service sector," said Jesus Davis, Industrial Info's research specialist for North American Oil & Gas Production, Pipelines and Terminals industries. "Work has dried up, rigs are being stacked up, job cuts are soaring and it's becoming harder and harder for oilfield-service companies to access capital."
"With the U.S. rig count at a historic low of about 251, down over 60% from year-earlier levels, there's a lot of excess capacity," Davis continued. "We expect more asset sales and mergers, but the only thing that will really fix oilfield services companies is a surge in demand. No one is expecting that for the near future."
Consulting firm Deloitte (London, England) recently released its mid-year update for the overall oil & gas industry. One of the trends the firm predicted was a pickup in mergers and acquisitions.
"The (oil and gas) industry will not fully recover until COVID-19 has been successfully contained in most countries, either with the development of a vaccine or the implementation of a widespread test-and-trace program," said the Deloitte report, Midyear Outlook for The Oil and Gas Industry. "Even as the number of new cases has been reduced in the hardest-hit countries in Asia and Europe, its spread is increasing in the Americas."
"Recovery will likely require not only for the number of new COVID-19 cases to drop substantially but also for economic activity to return to its pre-virus levels," the report continued. "That includes GDP growth, as well as other oil and gas-relevant indicators, including industrial activity levels; transport demand; and demand for goods like cars, appliances and other consumer products."
On July 30, the U.S. reported second-quarter GDP fell 32.9% on an annualized basis, the worst decline in U.S. history. The same day, U.S. COVID-19 cases surpassed 4.5 million, and the death toll from the pandemic exceeded 150,000.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
