SLB confirms that U.S. oil production below EIA estimates

[dan_s]

(Reuters) - Schlumberger Ltd (N:SLB) and Baker Hughes (N:BHGE), the world's top two oilfield services firms, warned on Friday of a slowdown in North America and a challenging year ahead as crude oil prices stay volatile.

Schlumberger said investments in North America were moderating as energy companies increasingly shied away from chasing higher production at the cost of financial returns.

"Oil prices remain volatile and, as a result, our customers remain cautious," Baker Hughes Chief Executive Lorenzo Simonelli said.

The company, in its first report to include GE Co's (N:GE) oil and gas business since their merger, reported a quarterly profit that missed analysts estimates by a wide margin.

Schlumberger reported a 53 percent jump in revenue from North America, its biggest market, in the latest quarter, but cautioned that activity had been slowing.

"In the U.S. Gulf of Mexico, activity continued to weaken in the third quarter, and the outlook remains bleak for this region based on current customer plans," Schlumberger said.

The company's results and warnings come amid slowing drilling activity in North America.

U.S. rig counts have been falling for several weeks and recently hit a four-month low, while production has grown at a slower rate than the U.S. Energy Information Administration's estimate.

[cmm3rd]

SLB, in their Q3 report, also said: "Over the past six months, we have more than doubled the number of active fracturing fleets in North America land and have now redeployed almost all available capacity."

Imo, this is anecdotal support for the view that there are completion capacity constraints that are limiting well completions.

http://www.slb.com/news/press_releases/ ... nings.aspx

[dan_s]

Plus, the production per completed well in the Permian Basin has declined. I received this note this morning from one of our really smart members.

"I believe the bubble point issue is very real (higher gas/oil ratios in the Permian Basin). I believe we will start seeing it in the production data coming from shale players in the coming quarters. I think that wall street and the EIA have overestimated the ability of the shale players to increase production enough to overcome the natural decline of the past shale wells. I believe there is a train wreck coming. The Saudis keep mentioning it which makes me think they know something we do not know. Their inventories continue to decline. I believe Simmons was right but just off on his timing by about 10 years. 2018 could be a very interesting year. All of the giant fields discovered long ago have been producing a very long time and should be going into decline. As the world approaches 100 million barrels a day (of demand), I can’t help but believe that supply will be short and that current prices must improve. Hard to see it today, but looking out into the future, it has to be coming."

I don't think it is a "Train Wreck", but the global oil market is clearly much tighter than the Wall Street Gang perceives it to be. - Dan