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Supercycle underway for Natural Gas, Oil Markets, says Schlumberger CEO

A steady recovery in global energy demand, combined with tighter natural gas and oil supplies, is creating favorable conditions for activity in the year ahead, Schlumberger Ltd. CEO Olivier Le Peuch said Friday.

Supercycle underway for Natural Gas, Oil Markets, says Schlumberger CEO

The world’s largest oilfield services company (SEO) unveiled its strong fourth-quarter results, with Le Peuch outlining the outlook and outlook for 2022 during a conference call.

“The macro environment is increasingly supporting a potential mass cycle,” and market growth extends “onshore and offshore well beyond 2022,” Le Peuch told investors during the call.

The company has “increased confidence in our view of strong, perennial market growth, tight oil supply, and demand growth beyond the pre-pandemic peak.” Exploration of spare capacity and commodity support prices should lead to a significant increase in capital expenditure by exploration and production (E&P) customers.

“In addition, we expect more widespread improvements in service pricing in response to market conditions as technology uptake increases and service capacity approaches,” said the CEO.

Schlumberger expects oil demand to exceed pre-pandemic levels by the end of 2022, with growth in 2023 and beyond.

North American Forecast E&P Spending Up 20%?

“Long-term developments”, such as offshore, where projects can take years, are also likely to increase capital expenditure (capex) in the E&P sector.

“Going into 2022 in particular, we expect at least a 20% increase in capital in North America, which will impact on both onshore and offshore markets, and internationally, it is estimated that teenage capital spending will rise to the middle. ”

Le Peuch said the year should begin with the beginning of April, with a “strong seasonal rise” in 2Q2022 “across all divisions.”

Positive market conditions, Le Peuch said, “are very similar to those of the last great industry cycle, suggesting that emerging global capital spending will lead to an exceptional multi-year growth cycle. on demand. ”

The previous cycle of oil and growth began in 2009, as North American land activity progressed as the production of rare earth oil and gas accelerated. Growth continued until 2014.

Schlumberger, regarded as a leader in digital and technology, is “well prepared to take full advantage of this future growth,” said Le Peuch. “We have entered this cycle in a strong position, having reset our operating lever, expanded peer leadership margins across multiple quarters, and aligned our technology and business portfolio with new industry requirements.”
Last year was one in which the company consolidated its core portfolio and expanded its sustainable energy portfolio. Now has begun to return to growth across the board, Le Peuch said.

To this end, capital investments have hit higher for 2022 to $ 1.9-2 billion from $ 1.7 billion in 2021.

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Why Is Peuch So Confident?

Asked why he was confident of growth this year, Le Peuch said that it comes in part from a strong 2021 performance.

“I think the market mix will improve,” which went to offshore markets, one of Schlumberger’s specialties. “We hope this will only accelerate as the year progresses…

“Technology adoption is also increasing, as you have seen, including digital,” as customers seek to install more technology for energy transfer.

Revenue in 4Q2021 increased to $ 6.22 billion, an increase of 6% from 3Q2021 and 13% from a quarter of a year ago. North American revenue jumped 13% sequentially and was up 10% year-on-year to $ 1.28 billion, which outperformed the growth in rig count in particular, the CEO noted. Excluding the impact of some North American asset sales in 4Q2020, revenue increased by 19% in 4Q2021.

Meanwhile, international revenue rose 5% from 3Q2021 and 13% from 4Q2020 to $ 4.9 billion. Latin American revenue increased 4% sequentially and 24% year / year to $ 1.2 billion.

Pre-tax operating margins in 4Q2021 improved 51 basis points (bps) sequentially to 15.8%, leaving six consecutive quarters of bps improvement. The sequential margin improvement was driven in part by higher Digital & Integration sales.

During 4Q2021, digital unit revenue increased 10% sequentially by $ 889 million and margins increased by 268 bps to 57.7%.

Well Performance growth further increased in the last three months of 2021, with revenue up 8% sequentially to $ 1.3 billion. The gains were attributed to the higher intervention and stimulus activity mainly in the international offshore markets.

Well construction revenue of $ 2.4 billion increased 5% sequentially due to higher ground and offshore drilling, both in North America and internationally. Margins were essentially flat 15.4% from 3Q2021, as increased activity and pricing gains were offset by seasonal effects.

Revenue from Production Systems in 4Q2021 increased 5% sequentially to $ 1.8 billion, on support for new offshore projects. However, margins fell by 85 bps to 9% “mainly due to the impact of delayed delivery due to global supply and logistics constraints.”

Net earnings in 4Q2021 jumped 61% year / year to $ 601 million (42 cents / share) from

$ 374 million (27 cents). North American revenue in 4Q2021 rose 12% year / over to $ 484 million, while international revenue was up 5% to $ 1.3 billion. Latin American revenue rose 24% from 4Q2020 to $ 1.2 billion.

Net earnings for 2021 were $ 1.89 billion ($ 1.32 / share) compared to a 2020 loss of $ 10.5 billion (minus $ 7.57).

For 2021, North American revenue was down 18% from 2020 at $ 4.5 billion, while international revenue was up 2% to $ 18.3 billion.

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