Halliburton, Baker Hughes, SLB have mixed year despite high oil prices

© Steve Gonzales, Staff / Houston Chronicle

Halliburton's employees work at a three wellhead fracking site in Midland in 2017. 

The oil and gas industry had a banner year in 2022, but changes in the oil field services industry meant the riches of high oil prices trickled down unevenly to the sector. 

The big three oil field services companies – Schlumberger (which recently rebranded to SLB), Halliburton and Baker Hughes – posted mixed results for 2022 as the industry navigated Russia’s war against Ukraine, supply chain issues and a continued move towards low-emissions energy, all while the world is clamoring for more fuel. In past oil booms, high oil prices helped lift profits in the service sector, but that has changed as service companies splinter in their approaches as they focus on different aspects of the energy industry. On top of that, the locations in which companies already have existing operations and customers are becoming more important. 

“Some of the big growth markets are really Latin America, the Middle East, Africa,” said Matt Hale, lead supply chain analyst at Norwegian firm Rystad Energy. “Expect there to be a lot more activity – part of that is exploration driven and part of it's just the timing of larger projects or developments.”

International exposure contributed to SLB's strong 2022, allowing the Houston- and Paris-based company to capitalize when Moscow’s invasion of Ukraine pushed oil above $100 per barrel for part of the year. Hale said the company operates in all the major growth areas on the globe, and is seeing an uptick in interest for offshore drilling equipment. SLB earned $3.4 billion last year, a more than 75 percent jump from the $1.9 billion profit posted in 2021. Revenues grew more than 20 percent to $28.1 billion from $23 billion in 2021. 

Halliburton, meanwhile, has a large presence in North America’s onshore oil fields and is a leader in hydraulic fracturing. That boded well for the Houston company in 2022: it posted  a $1.6 billion profit for the year, just barely higher than the $1.5 billion earned in 2021; revenues rose more than 30 percent to $20.3 billion compared to $15.3 billion in 2021.

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While North American oil and gas production is expected to grow this year, forecasts from the Energy Department and major consulting firms have shown the pace of growth slowing compared to previous years. 

Hale said he expects Halliburton to look to global projects for future growth, especially in the Middle East. On Tuesday, Halliburton CEO Jeff Miller told investors that about half of its revenue comes from international markets, a trend he said would likely continue. 

“It's clear to me that oil and gas is in short supply and only multiple years of increased investment in both stemming declines and reserve additions will solve short supply,” Miller said. “I believe these investments will drive demand for oil field services for the next several years.” 

While SLB and Halliburton have both ventured into low-emission technology, analysts say Baker Hughes has raced ahead when it comes to the transition to low-carbon energy. Also, unlike its peers, Baker Hughes has an industrial manufacturing business that’s poised to benefit from the growth in natural gas production and transportation. 

Still, the company had a challenging year. It took a greater loss due to its exposure in Russia than the other two companies, analysts said, posting a $601 million loss for 2022, steeper than the $219 million loss posted in 2021. Revenues rose to $21.2 billion from $20.5 billion in 2021. 

The company announced it was restructuring in September, which analysts said helped improve margins in the fourth quarter. Additionally, Baker Hughes said some of the issues it faced in 2022, such as snags in the supply chain, should ease in the coming year.

Analysts aren’t so sure. 

“We are cautious given the continued recessionary pressures on global economies that could cause further delays in chip manufacturing,” CFRA Research analyst Jonnathan Handshoe said in an analysis of the earnings, “which could negatively impact Baker Hughes’ ability to convert its backlog.”

Rystad's Hale said he largely expects SLB to remain a leader in 2023 because of its international presence, and is watching to find out if the restructuring at Baker Hughes will continue to pay off. 

“It'll be interesting to see if they (Baker Hughes) can continue margin improvements and actually match the growth rates of Halliburton and Schlumberger,” he said.