SLB Reports U.S. Activity is 'Subdued'

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Citing concerns about energy security given recent geopolitical events, the head of upstream services company SLB (NYSE:SLB) (Houston, Texas) said operations in the U.S., a major producer, "remained subdued."

SLB, formerly Schlumberger, reported net income for the three months ending September 30 of $9.2 billion, unchanged from the second quarter but 10% better than year-ago levels.

"These results were achieved by our ongoing focus on cost optimization; greater adoption of our digital products and solutions; and the contribution of long-cycle projects in deep water and gas," said Olivier Le Peuch, the chief executive officer of SLB.

Total revenues for SLB during the second quarter were $9.2 billion, though its North American operations took a loss. The company blamed lower drilling revenues.

On Friday, Le Peuch said that "land activity in the U.S. remained subdued," though its North American operations reported a 3% increase in revenue over the second quarter to $1.7 billion.

A survey conducted last month by the Federal Reserve Bank of Dallas found the precipitous decline in commodity prices over the last few years is reason for concern. West Texas Intermediate (WTI), the U.S. benchmark for the price of oil, was trading near $69 per barrel on Friday, relative to prices in the upper $80 range at this time last year. Henry Hub, the U.S. benchmark for the price of natural gas, is down about 15% from year-ago levels.

The Dallas Fed added that activity in the U.S. oil and gas sector declined slightly during the third quarter, with upstream services firms deteriorating the most. For SLB, its revenue stream from North America paled in comparison to the $7.4 billion from the rest of the world.

Commenting on geopolitical issues, LePeuch said the focus is on long-term energy security, given the potential for supply disruptions.

The global commodities market has adjusted to the loss of Russian oil and gas due to Western-backed sanctions, imposed for Russia's 2022 invasion of Ukraine. But simmering conflict in the Middle East, where Isreal supposedly has its sights on military targets in Iran, could pose significant global issues.

"SLB is well positioned to navigate the evolving market conditions by leveraging its unique exposure to long-cycle projects in international, deepwater, and gas markets," LePeuch said.

Shipping lanes are already a concern due to frequent attacks on Red Sea cargo from the Iranian-backed Houthi rebel group in Yemen. An attack on Iran would only add to the concerns given that the Strait of Hormuz handles about 20% of the daily waterborne cargoes of crude oil.

Markets remain subdued, however, despite the looming geopolitical risk. Sluggish growth from China, the world's second-largest economy behind the U.S., coupled with an economic slowdown in Western markets, are weighing down on the commodities market.

In separate news, SLB said Friday it sold off its interest in the Palliser oil and gas block in Alberta, Canada, to an undisclosed buyer for undisclosed terms.

"The Palliser Block consists of oil and gas wells, surface facilities, a pipeline network, and certain oil and gas development rights," SLB said.

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