Two energy service giants employing thousands of people in the north-east have reported profits up by more than a quarter.
Schlumberger and Baker Hughes both highlighted improvement in the North American market during the first three months of 2013, driven by increased drilling in the Gulf of Mexico.
North America accounts for about one-third of revenue at Schlumberger, the world’s largest oilfield services company, while the region generates half of rival Baker Hughes’ annual income. The companies – both based in Houston – provide drilling technology and equipment, well construction services and seismic surveys to oil and gas companies globally.
UK North Sea work got only a brief mention in Schlumberger’s first quarter results and Baker Hughes did not mention it at all, although the two firms have a huge presence in the region.
They are both benefiting from oil and gas companies ramping up operations in the Gulf of Mexico, which is poised to deliver more than 700,000 barrels per day of crude. While Schlumberger’s revenue from deepwater drilling in the region fell in the first quarter due to operational delays, the company expects the situation to normalise in the current quarter.
Paal Kibsgaard, Schlumberger chief executive, said the outlook for deepwater drilling activity in the Gulf of Mexico remained strong for the full year.
He also said global market conditions were still improving despite a harsh winter in North America and Russia, slowing growth in China, and problems in Ukraine.
“These factors, however, are likely temporary in nature . . . but supply and demand is expected to normalise over the coming months,” he added.
Baker Hughes said it had a good three months in the Gulf and it expects business to continue to improve in the region, particularly in the second half of the year.
Schlumberger’s first quarter pre-tax profits came in at £1.24billion, up from £962.5million a year ago, on revenue up by 6.3% at £6.69billion.
Baker Hughes reported a 27% rise in adjusted net income to £220million, with revenue was up nearly 10% at £3.41billion. Barclays analysts were upbeat on both stocks, saying the companies had done well in North America despite a colder-than-usual winter.
But oilfield services companies are expected to feel the heat as large oil companies, after a decade of double-digit growth, cut spending amid stagnating oil prices and higher project costs.