Oil and gas drilling is big business once again, if the leap in demand for services from Baker Hughes Co., the world’s No. 2 oilfield contractor, is any gauge.
The Houston-based company posted equipment orders in its fourth-quarter results that were $1 billion above expectations. That led to a 28 per cent jump in demand after years of painful cost-cutting.
Shares soared as much as 7.3 per cent to $6.05, the highest in almost three years. The company’s top competitors, Schlumberger and Halliburton Co., are also expected to deliver strong quarterly results when they report over the next several days, in the latest sign that the global oil industry is recovering from pandemic lows.
A “broader macro recovery will translate into rising energy demand in 2022, with oil demand likely recovering to pre-pandemic levels by the end of the year,” chief executive officer Lorenzo Simonelli told analysts and investors Thursday on a conference call.
Baker Hughes’ bigger order book was led by its turbomachinery business, which makes turbines used by liquefied natural gas producers. Shipments of the fossil fuel are providing a key outlet for shale producers as the U.S. gets set to become the world’s top exporter of LNG on an annual basis, beating out cornerstone suppliers Qatar and Australia.
In U.S. shale, closely held explorers are expected to remain more active this year as compared to the disciplined spending from their public-company counterparts, Simonelli said on the call. International oilfield growth will be led by Latin America and the Middle East, he said.
“The economic recovery coupled with several years of oilfield underspending has given rise to a new energy cycle,” Charles Minervino, an analyst at Susquehanna International Group, wrote in a note to investors last week. “The diversified services companies should exit 2021 on a high note.”
Global oil drilling is recovering after rig counts plummeted to record lows in late 2020. Explorers around the globe are expected to almost triple the pace of spending hikes this year compared to 2021, according to Evercore ISI. International regions are responsible for a record 81 per cent of explorers’ global spending this year, Evercore analyst James West said by phone.
That’s a promising sign for the big three service companies, which now generate most of their sales outside the U.S. and Canada.
Schlumberger, the world’s biggest oil-services provider, is expected to report results Friday, and Halliburton, the top provider of frack work, will release earnings Jan. 24.
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