Oilfield Services Firms’ Q1 Results Point to Another Strong Year Ahead

The Middle East and Asia will be key growth drivers for oilfield services companies.

Apr 21, 2014 at 3:38PM

Oilfield services firms Schlumberger (NYSE:SLB), Baker Hughes (NYSE:BHI), and Halliburton (NYSE:HAL) have released their financial results for the first quarter, posting better than expected profits. The results have highlighted strength in the Middle East and Asia. Both regions are expected to be key growth drivers for oilfield services firms going forward.

Excellent run in 2013
Oilfield services companies had an excellent run in 2013, with shares of Schlumberger, Halliburton, and Baker Hughes posting significant gains. As I noted in a previous article, the gains were mainly due to the fact that all three companies benefited from higher capital spending from oil majors. Although several big oil companies have announced plans to reduce capital spending over the next few years, the outlook for oilfield services companies has not dampened. This was confirmed by the recently reported first-quarter results.

Q1 results
Although the harsh weather in North America had a negative impact, all three major oilfield services firms posted better than expected earnings for the first quarter of 2014. Last week, Schlumberger reported first-quarter net income of $1.21 per share, beating Street estimates by a penny. Baker Hughes also beat Street estimates last week, posting first-quarter adjusted earnings of $0.84 per share. Analysts were expecting Baker Hughes to report adjusted earnings of $0.78 per share. On Monday, Halliburton reported earnings of $0.73 per share, beating forecasts of $0.71 per share.

More importantly, all three companies saw strong performance in the Middle East and Asia. Both regions are expected to be key growth drivers for oilfield services firms going forward.

Strong performance in the Middle East and Asia
Oilfield services firms have witnessed weakness in North America; however, their performance has continued to improve in the Middle East and Asia. In the first quarter of 2014, Halliburton saw its revenue and operating income from the Middle East/Asia region rise 13%. Dave Lesar, Chairman and CEO of Halliburton, said that Saudi Arabia led the improvement with growth across all product lines due to an increase in integrated project activity.

Schlumberger international revenue rose 5% in the first quarter of 2014. The increase was led mainly by 19% growth in revenue from the Middle East and Asia area. The company saw strong activity in Saudi Arabia and the United Arab Emirates.

Baker Hughes registered a 6% sequential increase in its international adjusted operating profit. The increase was driven mainly by resumption of the company's activity in Iraq, as well as by increased demand for high technology services in Africa, the Middle East, and Asia Pacific.

Another strong year ahead
Major oil companies have announced plans to slash their capital spending as they look to reduce debt and strengthen their balance sheets. That is not good news for the oilfield services industry. In addition, there is growing competition in North American shale fields. Still, the outlook for oilfield services companies remains bullish, thanks to growth in the Middle East and Asia. As I noted in a previous article on the industry, both regions will be the main growth driver for these companies.

Barclays Capital had noted in a report late last year that global exploration and production spending is expected to increase by around 6.1% to a record $723 billion in 2014, with a major part of spending growth expected to come from national oil companies in the Middle East. The first-quarter results of Halliburton, Schlumberger, and Baker Hughes have confirmed this as all three companies reported strong results from the region.

Given the solid outlook, there is certainly further upside potential in shares of oilfield services companies. 

3 stock picks to ride America's energy bonanza
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 


Varun Chandan Arora has no position in any stocks mentioned. The Motley Fool recommends Halliburton. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.

Compare Brokers