Newspaper article THE JOURNAL RECORD

Top Performers in Oil Services Played the International Arena

Newspaper article THE JOURNAL RECORD

Top Performers in Oil Services Played the International Arena

Article excerpt

Bloomberg Business News

For the U.S. oil services industry, the international arena remained the hot spot for business during the second quarter.

"The companies that did well in the second quarter are companies that operate with a heavy concentration of activities outside North America," said James Wicklund, an analyst with Rauscher Pierce Refsnes, Dallas.

Fueling the work were crude oil prices significantly higher than a year ago. Activity increased in the North Sea, where drilling had been depressed for some time, and growth continued in Latin America. In west Africa, Wicklund said, the political situation was stabilized to improved, where unrest earlier made for a difficult work environment.

During the quarter, Brent North Sea crude averaged $18.25 a barrel, up 13.5 percent from $16.08 a year earlier. West Texas intermediate averaged $19.45, up 9.6 percent from $17.75 a barrel.

While international drilling largely is fueled by the price of oil, exploration and development work in the Gulf of Mexico is tied primarily to natural gas.

During the second quarter, U.S. spot natural gas prices averaged $1.45 a million British thermal units, down 20.8 percent from a year earlier.

"This year had the second-lowest U.S. rig count in history with natural gas, which is the hydrocarbon du jour in the U.S., at depressed levels," Wicklund said.

The major U.S. oil field companies were well positioned to reap benefits of international work, with each earning more than half their profits from projects outside the U.S.

James Carroll, a PaineWebber analyst in New York, expects "particularly good results" from Schlumberger Ltd. and Halliburton Co.

Schlumberger will benefit from stronger marine seismic activity in foreign markets and higher use and dayrates for semi-submersible rigs on deepwater projects, Carroll wrote.

Halliburton will gain from the elimination of another 500 jobs and a reduction in its North American gas exposure, he said.

While Wicklund has the same positive outlook for Schlumberger, he believes Halliburton's performance still will be hampered somewhat by its continuing consolidation.

Western Atlas Inc., the largest seismic contractor and second-largest provider of wireline equipment to evaluate wells, is expected to have a strong second quarter, reflecting both its international operations and high-technology services.

"While the rig count may not move up by double-digit percentages over the next several years, technology and spending on technology is moving up at 20 percent to 30 percent per year," Wicklund said. …

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