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What's in Store for Oilfield Service in Q4 Earnings?

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Nilanjan Banerjee
·5 min read
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Investors gained a brief idea about how oilfield service firms have fared in the recently-concluded fourth quarter from Halliburton Company’s HAL earnings announcement on Jan 19. Cost-cutting measures to combat the pandemic, and demand recovery for oilfield equipment and services likely aided companies belonging to the space in the quarter.

Oilfield Service Business Overview

Oilfield service players offer technologies to oil and natural gas drillers for efficient drilling and setting up wells. Among the services offered are manufacturing and mending of equipment used for extracting crude from wells.

Notably, drillers now specialize in horizontal or angled drilling since explorers and producers do not find it profitable to employ vertical drilling techniques to many wells. Oilfield service firms help explorers drill horizontal wells more efficiently.

Overall, the fate of all oil service firms is positively correlated to crude prices and also to the capital investment decisions of drillers.

Oil Price Rises in Q4

The price of West Texas Intermediate (WTI) crude oil has improved roughly 25% through the December quarter of 2020. The approval of two coronavirus vaccines that will probably help end the deadliest pandemic in more than a century in the last month of the fourth quarter by the U.S. health regulators boosted investor confidence in fuel demand recovery, lifting crude price.

However, the pricing scenario was definitely not as healthy as the pre-pandemic fourth-quarter 2019 levels. In the December quarter of 2019, the price of WTI crude traded consistently above the $50-per-barrel mark. In comparison, through the fourth quarter of 2020, the commodity traded below the mark.

Rig Count Increases

Thus, although crude price failed to cross the pre-coronavirus mark, prices improved in the fourth quarter of 2020 on positive vaccine development. This encouraged oil drillers to gradually return to the shale resources in the United States. Notably, in the week through Oct 2, 2020, the count of oil drilling rigs was 189 in U.S. resources, which increased to 267 in the week through Dec 31, 2020, per the weekly rig count data as published by Baker Hughes Company.

The rise in rig count has likely boosted demand for oilfield services in the United States since oilfield service players assist drillers in efficiently drilling crude wells. Hence, it can be said that the business scenario was favorable for oilfield service companies as reflected by Halliburton’s fourth-quarter 2020 adjusted net income per share of 18 cents, which beat the Zacks Consensus Estimate of 15 cents.

What Awaits These 3 Oilfield Firms in Q4?

Given the backdrop, let us take a look at how the following three oilfield service companies are placed ahead of their fourth-quarter earnings releases.

Our proprietary model clearly indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Based in Houston, TX, Schlumberger Limited SLB is scheduled to report fourth-quarter 2020 earnings on Jan 22, before the opening bell. 

Our proven model predicts an earnings beat for Schlumberger this time around as it has an Earnings ESP of +2.94% and a Zacks Rank #3.

Schlumberger Limited Price and EPS Surprise

Schlumberger Limited Price and EPS Surprise
Schlumberger Limited Price and EPS Surprise

Schlumberger Limited price-eps-surprise | Schlumberger Limited Quote

Baker Hughes Company BKR is set to report fourth-quarter earnings on Jan 21, before the opening bell. The chances of Baker Hughes delivering an earnings beat this time around are high as it has an Earnings ESP of +10.21% and a Zacks Rank #3.

Baker Hughes Company Price and EPS Surprise

Baker Hughes Company Price and EPS Surprise
Baker Hughes Company Price and EPS Surprise

Baker Hughes Company price-eps-surprise | Baker Hughes Company Quote

Core Laboratories CLB is scheduled to report fourth-quarter earnings on Jan 27, after the closing bell. Notably, the chances of the leading provider of reservoir description and production enhancement services delivering an earnings beat this time around are low as it has an Earnings ESP of -4.00% and a Zacks Rank #3.

Core Laboratories N.V. Price and EPS Surprise

Core Laboratories N.V. Price and EPS Surprise
Core Laboratories N.V. Price and EPS Surprise

Core Laboratories N.V. price-eps-surprise | Core Laboratories N.V. Quote

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Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
Core Laboratories N.V. (CLB) : Free Stock Analysis Report
 
Baker Hughes Company (BKR) : Free Stock Analysis Report
 
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