Schlumberger Limited (SLB - Free Report) announced that it has lowered capital budget for 2020 from the 2019 level.
The oilfield service firm estimates capital budget for this year to be as much as 30% lower than the prior year, since global energy demand has plunged owing to coronavirus pandemic.
Notably, low oil prices have compelled explorers and producers to downwardly revise capital spending for 2020, calling for reduced upstream activities. Among the upstream firms that are reducing capital budgets are Cimarex Energy Co. (XEC - Free Report) , Pioneer Natural Resources Company (PXD - Free Report) and EOG Resources Inc. (EOG - Free Report) .
Thus, with lower spending by explorers, there would be reduced demand for oilfield services. Hence, oilfield service players are responding to the reduction in demand for their services by curtailing capital budget. Baker Hughes Company is another oilfield service giant that is reportedly planning for capital spending cut.
Foreseeing second-quarter 2020, Schlumberger stated that there will be a significant decline in the count of onshore rigs in North America. Completion activities will also decline in the region. In fact, the oilfield service company projects North American onshore rig tally to touch 2016 trough levels in the second quarter.
In the international market as well, there will be a reduction in some activities in the second quarter, per Schlumberger. In other words, lower spending by customers owing to the pandemic — which could affect field crews — will hurt the company’s international operations.
Based in Houston, TX, Schlumberger currently carries a Zacks Rank #5 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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