Schlumberger (SLB) President of Operations Patrick Schorn at Wells Fargo Energy Conference

Schlumberger (SLB) President of Operations Patrick Schorn doesn’t think oil is going back to its recent highs

“The current downturn is now 20 months long since the US land rig count peaked in October 2014. It already outpaces that of 1986/87 and estimated E&P spend for 2016 is now about a third below that of 2014. At such levels, continual growth in production capacity cannot be maintained, and production lost to decline cannot be fully replaced.   E&P capital expenditure has been cut with exploration halted, development aggressively curtailed, and service industry prices relentlessly squeezed. While this playbook might have allowed the business to return to normal in the past, we do not think that oil prices will return to their previous high levels any time soon, short of a major supply upset, given the greater availability of lower-cost Middle-Eastern supply and the progress that has been made in the cost of unconventional resource development in North America.”

Still seeing pricing pressure amongst their customer base

“While minor increases in rig count in North America together with the move toward completing the inventory of drilled but uncompleted wells are positives, pricing pressure and the significant excess of service equipment will limit our earnings potential until 2017.  With oil prices now increasing we will be seeking to reverse the temporary pricing concessions we have made. Furthermore, as this picture develops, we will continue to focus on matching resources to activity, leveraging transformation initiatives, and maintaining the longer-term operational and technical infrastructure that will be needed in the future.”