A Slow Rebound Begins For Local Oil And Gas Service Providers

While the worst appears to be over, experts say this won’t be a quick recovery for the oil industry as a whole.

The sign at the entrance to Halliburton's North Belt Campus
The sign at the entrance to Halliburton’s North Belt Campus.

Halliburton had a rough second quarter — losing more than $3 billion and cutting 5,000 jobs.

But the Houston-based oil services company still made it through the quarter in better shape than analysts predicted.

Halliburton CEO Dave Lesar says his company was right when it declared at the end of the first quarter that the North American oil rig count had hit bottom.

Now, with the moderate rebound in the price of crude, Lesar says more of Halliburton's exploration and production customers are no longer just trying to survive.

"There is a spring in their step that I didn't see earlier in the year. And in almost every case, they're talking about adding rigs, buying assets, or doing something value accretive. In short, they are getting back to business," Lesar said.

Since February, crude oil prices have rebounded from $28 to around $45 a barrel. Byron Pope with research firm Tudor, Pickering, Holt, and Company says that's good, but not quite good enough for many exploration and production companies.

"Our argument is that, as E&P companies want to go back and put additional crews and rigs back to work, that will have an inflationary impact on their cost structure, which will necessitate a higher crude oil price to make their economics work," Pope said.

According to Pope, at the peak in the fall of 2014, there were 1,900 oil and gas land rigs in the US. Today, Pope says there are only around 400. Pope expects that rig count will double, maybe even triple, by the end of 2018. He predicts that should be enough to give exploration and production companies, and their service providers, more comfortable margins.

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David Pitman

David Pitman

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