Jan. 19 (UPI) -- Strong demand growth and an extended OPEC-led effort to balance the market suggests 2018 will be good for drilling services, Schlumberger's head said Friday.
Schlumberger is the world's largest oilfield services company and was among those that encountered headwinds two years ago when the price of crude oil dropped below $30 per barrel. The company's first quarter 2017 revenue of $6.9 billion was down 3 percent compared to the previous term, but up 6 percent from first quarter 2016.
For the three months ending Dec. 31, Schlumberger said its revenue of $8.1 billion was up 3 percent from the previous term and 15 percent higher than the same period in 2016. The price for Brent crude oil last year jumped 20 percent and is now trading close to four-year highs.
Schlumberger Chairman and CEO Paal Kibsgaard said a challenging business environment over the last few years meant the company had to reassess its entire product line and now the only product that doesn't look to meet return expectations is the seismic acquisition business, a sector used to assess reservoir potentials.
Looking at the landscape in 2018, Kibsgaard said the effort by the Organization of Petroleum Exporting Countries to correct the market surplus that hammered oil prices in recent years was creating a tighter market and improving the general outlook for the energy sector.
"All together, this means the oil market is now in balance and the previous oversupply discount [in oil prices] is gradually being replaced by a market tightness premium, which makes us increasingly positive on the global outlook for our business," he said in a statement.
On balance, however, his statement was almost identical to his comments in the third quarter. Nevertheless, a survey from commodity pricing group S&P Global Platts said crude oil inventories ended 2017 at about 10 percent above the five-year average, compared with 35 percent at the end of 2016.
The recovery in crude oil prices means a recovery for U.S. shale oil production, which is on pace to set a record this year at 10 million barrels per day. After three years of chronic under-investment, meanwhile, Kibsgaard said the rest of the world is showing fatigue.
"The underlying signs of weakness will likely become more evident in the coming year, as the production additions from investments made in the previous up-cycle start to noticeably fall off," he said.