Investments in North American oilfields are expected to be down this year while international markets are expected to grow, Schlumberger CEO Paal Kibsgaard said.
Speaking at the Scotia Howard Weil Annual Energy Conference in New Orleans, Kibsgaard said the oilfield service company is projecting that exploration and production investment levels in North America will be down more than 10 percent in 2019 compared to 2018.
Crude oil prices are still recovering from a dramatic drop in the fourth quarter of 2018. Although revenue from the company’s international markets such as Africa, Asia and Latin America are expected to grow by high single-digit numbers, Kibsgaard said a number of factors are affecting activity in North America.
“Higher cost of capital, lower borrowing capacity and investors looking for capital discipline and increased returns suggest that future E&P investments will likely be at levels dictated by free cash flow,” Kibsgaard said. “Based on this, we expect E&P investment to be down more than 10 percent in 2019 versus 2018.”
In addition to lower investments in North America, Kibsgaard said Schlumberger anticipates more technical challenges from issues such as how drilling more than one well on a same lease impacts production.
And with more drilling expected to take place outside Tier 1 acreage, Kibsgaard anticipates hitting a plateau on previous trends such as drilling longer laterals on horizontal wells and proppant use per stage.
“All these factors point to a more moderate production growth from U.S. shale in the coming years,” Kibsgaard said. “This means that investments on the international markets will need to increase further for the industry to meet the growth in global demand. This normalization of the global E&P spend is good news for Schlumberger, as our earnings power in the international markets is highly differentiated.”
Founded in 1926 and headquartered in Paris, Schlumberger has its U.S. headquarters in Houston. The company finished 2018 with a $2.2 billion profit on $32.8 billion of revenue.
Schlumberger’s international operations accounted for $20.4 billion of revenue in 2018 while the company’s North American operations accounted for $12 billion.
This article first appeared on the Houston Chronicle – an Energy Voice content partner. For more from the Houston Chronicle click here.