SLB, the world’s biggest oil field services provider, said it will take time for full production capacity to return to the Middle East and will require a durable resolution to the US-Iran conflict.
The company, which helps clients drill oil wells and map underground pockets of crude, said the conflict is encouraging customers to spread investment across more regions, supporting demand for deepwater drilling, exploration and projects that increase production from existing fields, according to a statement Friday.
“While activity began to recover in certain countries during the second quarter, the timing of a full recovery remains uncertain and will depend on a durable resolution of the conflict,” Chief Executive Officer Olivier Le Peuch said in the statement. “As activity improves, we expect the return to full production capacity to take time.”
The results follow mixed investor reactions to earnings from Halliburton Co. and Weatherford International Plc as oil-price volatility and geopolitics cloud the outlook for upstream spending through the end of 2027.
Despite the robust profits reaped by major oil producers since the Iran war kicked off in late February, management teams are hesitant to increase drilling budgets without more clarity on where energy markets are headed.
SLB posted adjusted second-quarter earnings of 55 cents a share, surpassing the 51-cent median of analyst estimates. Shares rose 4.3% before the start of regular trading in New York.
Weatherford executives said earlier in the week they expect Middle East activity to continue to recover but that it’ll take some time to fully normalize. Activity has largely rebounded to pre-war levels in Saudi Arabia and the United Arab Emirates, though many wells in Kuwait and offshore Saudi Arabia remain shut, David Anderson, an analyst at Barclays, wrote in a note.
Given its long-standing relationships with state-controlled oil companies, “SLB should be the first call for both near-term production restoration and the medium-term capacity catch-up,”