Oilfield Service Providers Enjoying Soaring Profits Amid Robust Demand

The Big 3 oilfield services (OFS) companies Baker Hughes (NASDAQ:BKR), Halliburton (NYSE:HAL) and Schlumberger (NYSE:SLB) are set to post a combined second-quarter adjusted profit of $2.04 billion, compared with $1.27 billion in the year-ago quarter, thanks to robust demand for their services as well as a surge in offshore oil and gas drilling.

"International strength is led by the Middle-East and Latin America and is powered by a multi-year push to grow oil and gas production capacity, near-term OPEC+ cuts notwithstanding," BofA analysts said this month.

"(OFS) Companies with International/equipment exposure have strong visibility to multi-year volume growth and orders," TD Cowen analysts said earlier this month.

Norwegian energy intelligence firm, Rystad Energy, has predicted that offshore oil production will surge 35% in the current decade.

According to Rystad, offshore production will jump to 3.3 billion barrels per year by the turn of the decade from 2.5 billion in 2021. Surging offshore production in Brazil has significantly improved the utilization of shuttle tankers, with activity soaring by 55% from 695 million barrels in 2013 to 1.07 billion in 2021. A further increase of 72% is forecast by the end of 2030, when total volumes handled by shuttle tankers in the country will hit 1.84 billion barrels. 

"There is a need for a new influx of shuttle tankers to meet the increasing demand and replace some of the aging capacity that will be taken out of service. Crude oil extraction will continue for many years to come and, given the robust economics and competitiveness of the offshore industry, new investments in offshore production are likely to continue building, ensuring a bright future lies ahead for the shuttle tanker industry," says Oddmund Føre, senior vice president of energy service research with Rystad Energy.

Hardly surprisingly, OFS stocks are soaring: the sector's popular benchmark, VanEck Oil Services ETF (OIH), has returned 14.3% in the year-to-date compared to -3.7% return by the energy sector's Energy Select Sector SPDR Fund (XLE).

By Alex Kimani for Oilprice.com

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