Oilfield services giant Schlumberger stock rallied Friday as it beat Q1 earnings and revenue estimates. The company also announced a 40% increase in its dividend. Rival Halliburton also reported better-than-expected first-quarter earnings Tuesday morning as $100 crude oil and Russia's Ukraine invasion is spurring a pickup in drilling activity. But Baker Hughes missed earnings Wednesday.
BKR stock plunged for the week while Halliburton and Schlumberger also retreated.
Oil stocks have been on the upswing since the Biden administration has resumed selling leases to drill for oil and gas on federal lands.
Even as crude oil prices rose in 2021, shale producers were reluctant to ramp up drilling activity, vowing to focus on profits and shareholder returns. But with Russia's Ukraine invasion pushing crude above $100, drilling activity is picking up. Oil rig counts, while well off the levels of late 2018 and early 2019, have risen for four straight weeks.
With Russian crude likely out of favor for an extended period, shale operators may feel more confident that ramping up production won't lead to a glut that slashes prices and profits.
All that points to steadily rising demand for oilfield services and equipment.
Biden OKs Drilling On Federal Lands
The Interior Department resumed leases for oil and gas drilling on federal lands as Monday. The number of acres — 144,000 — is 80% below what was originally considered, while companies will have to pay higher royalties.
But the move is a reversal for President Biden. During the 2020 campaign, he urged a complete ban on new drilling on federal lands. With gasoline prices soaring and inflation at a 40-year high, Republicans had harshly criticized Biden over the lack of new drilling.
In late February, the administration said it was delaying decisions on new oil and gas drilling on federal land after a federal court blocked federal agencies from using an estimate known as the "social cost of carbon" to evaluate the damage done by carbon emissions stemming from energy production.
Schlumberger Earnings, Stock
Schlumberger posted adjusted EPS of 34 cents, a 62% jump vs. the year-ago period and topping FactSet estimates for 33 cents. Revenue grew 14% to $5.96 billion, beating the FactSet consensus of $5.91 billion.
"The confluence of elevated commodity prices, demand-led activity growth, and energy security are resulting in one of the strongest outlooks for the energy services industry in recent times," Schlumberger CEO Olivier Le Peuch said in a statement.
Schlumberger also approved a 40% increase in its quarterly cash dividend to 17.5 cents per share.
International revenue rose about 10% from the last quarter led by higher drilling in Latin America. North America sales grew 32%.
Its Europe, CIS (a region that covers the former Soviet Union) and Africa division, revenue fell 12% sequentially due to a seasonal decline in activity and depreciation of the Russian ruble.
SLB stcok rose 2.5% to 41.65 on Friday, but closing off highs. Shares fell 3.7% for the week. The stock is consolidating near a 52-week high, moving above some short-term levels. Shares have rebounded from their 10-week line and now have a proper base on a weekly chart, giving it a 46.37 buy point.
Haliburton Earnings
Estimates: FactSet analysts expected Halliburton to earn 34 cents a share in Q1. Sales were seen coming in at around $4.2 billion.
Halliburton, along with Schlumberger and some others, could report some impact from exiting Russian contracts.
Results: Halliburton earnings per share came in at 35 cents a share, up 147% vs. a year earlier. Revenue rose 24% to $4.28 billion.
"We see significant tightness across the entire oil and gas value chain in North America," said CEO Jeff Miller in the Halliburton earnings release. "Supportive commodity prices and strengthening customer demand against an almost sold-out equipment market are expected to drive expansion in Completion and Production division margins."
He added that Halliburton sees "strong international business to increase throughout the remainder of the year."
Completion and production revenue jumped 26% in Q1 to $2.4 billion vs. the year-ago quarter. Drilling and evaluation revenue rose 22% to $1.9 billion, due to increased drilling-related services globally.
North America revenue surged 37% in the first quarter to $1.9 billion, while international revenue was up 15% to $2.4 billion.
"Healthy revenue growth is expected for the balance of 2022 as oil producers deploy some of their cash flow from higher oil prices," said Third Bridge analyst Peter McNally.
McNally adds: "For Halliburton and its peers, the key question will be how they can convert that spending into operating profits given some of the challenges across the global supply chain, a tight labor market, and a volatile regulatory environment."
Meanwhile, Halliburton recorded a pre-tax charge of $22 million in the first quarter of 2022 primarily related to the write down of all its assets in Ukraine, including $16 million in receivables.
HAL Stock
Halliburton stock hit a fresh multiyear high Tuesday morning after earnings, but closed the week down 7.5% at 37.69. Shares have skyrocketed in lockstep with soaring oil prices since the start of the year.
HAL stock rose Monday to its best levels since late 2018. Shares are well extended past a 26.85 buy point from a cup base, according to MarketSmith.
Halliburton has posted three straight quarters of triple-digit earnings gains. Sales growth has accelerated in the last three quarters as well. The company's RS Rating is 98 out of a possible 99. Its EPS Rating is 74.
Halliburton's relative strength line is trending lower in recent days but is still near a multiyear high.
Halliburton 'Better Equipped'
Griffin Securities analyst Kevin Simpson, who has a Buy rating and raised his price target for HAL stock to $45 from $35, says in a recent report to clients Halliburton is well-positioned to benefit from the current geopolitical environment.
"With Russian oil and natural gas now tainted in the West probably for many years, the case for a strong drilling upcycle has clearly strengthened further," he wrote.
Simpsons says investors can expect drilling budgets to grow at an accelerated pace. But he also says supply-chain issues will likely persist at least through this year.
"We believe that HAL is relatively better equipped to manage their supply chains than most of its competitors and that the company has the pricing power to pass on higher costs of raw materials, including fraction sand," Simpson said.
Baker Hughes Stock
BKR stock rose plunged nearly 14% last week to 32.20, plunging through its 50-day and 10-week lines.
Baker Hughes posted EPS of 15 cents, 25% above the year-ago period, on a 1% sales increase to $4.84 billion. Wall Street had expected EPS of 19 cents a share on sales of $4.99 billion.
Baker Hughes said its results reflected market volatility in the first few months of 2022 with stronger orders offset by weaker profit margins.
The company says is sees weaker revenues in its Russia-related businesses this year, particularly in its oilfield services unit.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
