Middle East conflict severely impacts oilfield services industry! This week, major companies to release earnings reports; Schlumberger (SLB.US) profits may plunge 31%

According to Zhitong Finance APP, this week major global oil service companies will release their financial reports one after another, and the impact of the Iran geopolitical conflict on their performance will become clear. The market expects net profits of Schlumberger (SLB.US), Baker Hughes (BKR.US), and Halliburton (HAL.US) to all show declines.

Halliburton will kick off the industry's earnings season on Tuesday, with analysts on average expecting its earnings per share to drop by 2%. Later this week, Schlumberger is expected to report a 31% decline in earnings per share, which would be the largest drop since the last quarter of 2020. Baker Hughes will announce its results on Sunday, with earnings per share expected to fall by 21%. Schlumberger and Baker Hughes have significant business exposure in the Middle East region.

April to June was the first full quarter following the escalation of the US-Israel conflict with Iran, during which production in several countries, including Iraq, Qatar, and Kuwait, was restricted or completely halted. Although US production activity has recently increased, companies like Weatherford International (WFRD.US) and Halliburton still expect a greater impact in the second quarter as they continue to face challenges tied to operational disruptions and uncertain recovery timing.

Citigroup Global Markets analyst Scott Gruber stated that investors and analysts will focus on future developments in the Middle East, the pace of global oilfield activity recovery by 2027, and which regions will become the key drivers of industry growth.

Gruber said, “North American operators, especially private operators, are expanding their extraction scale, and oilfield operations in Latin America, Europe, and Africa are also increasing simultaneously. Therefore, except for the Middle East, the oilfield services market as a whole is improving.”

US drilling activity has rebounded after months of stagnation, helping to offset weakness in the Middle East. Rising oil prices have led producers to add about 46 new drilling rigs from the low point in December last year, and oilfield workers’ wages have also climbed to a historic high.

US drilling activity rebounds

James West, energy analyst at Melius Research, said that the resumption of some Middle Eastern oil fields is progressing faster than expected, and investors are eager to understand changes in the local situation, though the current scenario remains difficult to predict. “We need to grasp the real conditions of the Middle Eastern resumption frontlines: reservoir status, level of capacity restoration, and the time needed for full recovery.”

He also noted that shale oil companies’ capital expenditures overall remain cautious, although strong oil prices may prompt companies to raise capital budgets to the upper end of their guidance range to boost profits.

West believes: “Compared to last quarter, oil service companies are likely to feel a marginal rebound in market demand, with consulting orders and business negotiations increasing, as well as tightening supply of oilfield service equipment and manpower.”

Gruber stated that the resilience of the oilfield services industry remains a focal point for investors, who want management to demonstrate confidence in the outlook beyond 2026. “Investors hope to see the industry form a trend of sustained growth.”

The industry’s resilience partly derives from expanding data center infrastructure and energy-related supporting services, which are becoming new growth points for the oil service sector. West commented: “Expanding into this track is a logical transformation direction for the industry.”

He added, “If natural gas becomes an important power source for many data centers, oil service companies’ involvement in related supporting businesses has a natural advantage.”