Schlumberger expects oil demand to pick up through the year as the oilfield services giant sees "constructive macroeconomic drivers" buoying the oil and gas industry after the coronavirus-hit annus horribilis of 2020.
The company posted a net profit in the first quarter of this year — as compared with a massive loss a year earlier — and is particularly positive on prospects in international markets outside of North America.
Schlumberger posted a net profit of $299 million for the three months to the end of March 2021, down on the $374 million booked in the last three months of last year but well up on the loss of $7.38 billion booked in the first quarter of 2020, which included huge impairments.
Revenues in the most recent quarter were $5.22 billion, down from $5.53 billion in the fourth quarter last year and from $7.46 billion in 2020's first quarter, before the coronavirus pandemic had taken hold and decimated the oil and gas industry as global demand slumped amid lockdowns.
The first-quarter 2021 revenue reduction was due to asset sales in North America, without which global sales would have been flat sequentially.
"Notwithstanding the effects of seasonality, the first quarter affirmed the activity recovery that commenced last quarter," said chief executive Olivier Le Peuch.
The international market saw a sequential revenue decline on seasonal factors, with China and Russia experiencing particularly severe winter weather, but Latin America and several key countries in Africa and the Middle East seeing strong growth.
"The first-quarter revenue sequential decline was the shallowest since 2008, while international rig count experienced the strongest first-quarter sequential growth since 2011, affirming the international recovery," Le Peuch added.
Presenting a generally rosy outlook, Le Peuch said Schlumberger is "encouraged by constructive macroeconomic drivers".
"While the world is still grappling with Covid-19 infection rates, vaccination programmes and fiscal stimulus packages are expected to support a rebound of economic activity and oil demand recovery through the year," he said.
Le Peuch pointed to industry analysis as estimating that between 5 million and 6 million barrels per day of oil demand will be added by the end of this year, with the demand recovery to improve in the second quarter and exit 2021 just 2 million bpd short of 2019 levels.
“With the gradual return of oil demand, we anticipate North America activity to level off at production maintenance levels, while international activity is poised to ramp up through year-end 2021 and beyond," he said.
Le Peuch added that the company is "increasingly confident" that Schlumberger's international revenue will see double-digit growth in the second half of this year as compared with last year's final six months.
This, he said, "implies potential upside to the already robust growth that is anticipated in 2022 and beyond".
“There is an increasingly positive sentiment in the industry outlook as the recovery strengthens despite the lingering concerns regarding the Covid-19 crisis," Le Peuch said.
Moody's senior vice president Pete Speer said in a note on Friday afternoon: "Schlumberger’s first quarter 2021 results bode well for meeting our expectations of stronger free cash flow generation and debt reduction this year.
"Considering the usual seasonal activity declines and working capital effects, the company’s underlying trends in activity, margins and cash flow were strong.
"Schlumberger’s operating performance, free cash flow generation and commitment to deleveraging are all poised to benefit from accelerating drilling and development activity in international markets and a more focused and profitable business in the US."