OPINION: The oil and gas services sector is finally digging itself out of a financial hole and witnessing the green shoots of recovery.

Some executives are chasing wider green growth and pointing to a crucial new path to profitability.


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US engineering giant Fluor said it is determined to extract value out of energy transition, not just dwell on the past.

Fluor has the benefit of a new chief executive in David Constable, making it easier to break with some legacy thinking.

A recent strategy briefing highlighted four mega-trends to work with: industry 4.0 (digitalisation), energy transition, beyond globalisation and stakeholder engagement.

Constable thinks US President Joe Biden’s national plans for decarbonisation and new infrastructure have a lot to offer his business, too.

Fluor expects to be earning 70% of its revenues from non-traditional oil and gas segments by 2030.

But it also expects more improvements in oil and other commodity prices in the second half of 2021.

The price of Brent crude, around $57 per barrel, has steadily improved — opening the way for increased capital expenditure.

Baker Hughes, the Houston-based oilfield services company now positioning itself as an “energy technology” business, said it expected hydrocarbon investment to remain "tepid" over the next six months but pick up significantly after that.

Baker Hughes said its net profit rose to $653 million – an improvement from a net loss in the third quarter and a small net profit in the final quarter of 2019.

Recovery 'has commenced'

The positive outlook for the second half of 2021 is based partly on vaccine rollouts, which should put a brake on the Covid-19 pandemic.

Schlumberger, the world’s biggest oilfield services company, argues industry recovery “has already commenced.”

Schlumberger's net income rose 12% year-on-year in the fourth quarter to $374 million — and improved from a loss in the third quarter — as massive cost cuts helped its bottom line.

Schlumberger is on its way to cutting staff numbers by more than 20,000 to around 85,000.

Olivier Le Peuch, Schlumberger’s chief executive, said his company also was “visibly expanding its New Energy portfolio” to make itself more resilient and sustainable for the future.

Rival Halliburton also reported a significant sequential improvement in its fourth-quarter financial position, and anticipates a better market ahead.

Oil's green growth

Optimism for the services sector also could be influenced by the oil majors' financial results and their outlook for 2021.

ExxonMobil on Tuesday posted a massive $20.1 billion loss for the quarter, affected by impairments, but announced the creation of a new "low carbon solutions" business to advance plans for carbon capture and sequestration projects.

BP on Tuesday reported a small fourth quarter underlying replacement cost profit — its measure of net profit — similar to the previous quarter, but well below its year-earlier profit.

Chief executive Bernard Looney said that while 2020 was a tough year, it was "pivotal" for BP, as it launched a new strategy to become an integrated energy company.

It is worth remembering, however, that the five largest publicly listed oil majors are still worth less collectively on the stock market than electric carmaker Tesla.

S&P has threatened potential credit-ratings downgrades for several oil majors, such as ExxonMobil. But while it dimmed its outlook for BP, S&P did not include BP among those warned of ratings downgrades.

Fluor and other services companies might take some succor from that. They are right to look beyond oil recovery and on to a wider green renaissance.

(This is an Upstream opinion article.)

Correction: An earlier version of this article incorrectly described Houston-based technology provider Baker Hughes as a drilling company.