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An operator for Baker Hughes conducts a wireline survey on a Chesapeake Energy natural gas rig in the North Texas Barnett Shale near Burleson, Texas.
Matt Nager | Getty Images
President Donald Trump has championed the oil and gas sector with the call to “drill, baby, drill,” emphasizing his goal of achieving energy dominance. Yet, within the initial 100 days of his administration, companies engaged in the extraction and servicing of oil wells have faced significant challenges.
Currently, U.S. crude oil prices have dropped below $65 per barrel, reflecting a decline of over 20% since the beginning of Trump’s second term. This slump in prices has rendered it economically unfeasible for many companies to increase production, as reported by a study conducted by the Federal Reserve Bank of Dallas.
Industry leaders, particularly those deeply involved in the shale oil sector, expressed their discontent with Trump’s policies in a recent survey, where they highlighted “uncertainty” more frequently than at any point since the onset of the Covid-19 pandemic, noted Mason Hamilton, vice president of economics and research at the American Petroleum Institute.
Major oilfield service companies such as Baker Hughes, Halliburton, and SLB have cautioned investors that the reduction in oil prices will likely impede investments in exploration and production throughout this year. Since Trump’s inauguration, shares for Baker Hughes and SLB have fallen by over 20%, while Halliburton saw a steeper decline of 32%.
The energy sector as represented in the S&P 500 has experienced a drop exceeding 11% since January 20, a more substantial decrease compared to the nearly 8% decline observed in the broader market.
SLB’s CEO, Olivier Le Peuch, commented last week that Trump’s tariffs contribute to economic uncertainty, potentially leading to decreased demand, especially as OPEC+ speeds up supply measures quicker than anticipated.
“Under these conditions, commodity prices face challenges, and until they stabilize, companies are likely to adopt a more cautious stance concerning near-term activities and discretionary spending,” said Le Peuch during SLB’s first-quarter earnings discussion.
Decrease in Drilling Activity
The petroleum landscape in North America is perceived to carry greater risks than other global markets due to its acute sensitivity to fluctuations in commodity prices, according to SLB’s CEO.
Baker Hughes anticipates that global investment in upstream exploration and production will decline by high-single digits in 2024, with a projected drop in North American spending by low double digits, as articulated by CEO Lorenzo Simonelli during an earnings call last week.
“Factors contributing to a potential oversupply in the oil market, increasing tariffs, uncertainties in Mexico, and weakened activities in Saudi Arabia are together hindering any growth in international upstream investments,” Simonelli added.
However, the evolving landscape presents a lack of clarity regarding market movements in the latter half of the year, particularly concerning more sensitive sectors like drilling and completion of wells. Simonelli pointed out the possibility of further deterioration in market conditions.
“These projections rely on oil prices maintaining current levels alongside tariffs remaining stable at the present rates,” Simonelli explained. “A significant downward shift in oil prices or an escalation in tariffs could pose increased risks to these forecasts.”
Halliburton’s CEO, Jeffrey Miller, also noted that clients are currently reassessing their activity plans for the near future. He cautioned during Halliburton’s earnings call that reduced activity levels could lead to “higher-than-normal whitespace,” indicating periods where equipment remains idle.
SLB expects its revenue to either remain stable or see modest growth in the latter half of the year. Baker Hughes estimates a tariff-related impact of $100 to $200 million on its earnings, assuming no further increases in tariff rates this year. Halliburton predicts trade tensions will affect its earnings by 2 to 3 cents per share in the upcoming second quarter.
Energy Secretary Promises Clarity
Drilling contractor Patterson-UTI Energy has also indicated an uncertain outlook, although current activity levels remain stable, as stated by CEO William Hendricks during a recent earnings call. Since Trump’s inauguration, Patterson-UTI’s stock has plummeted by about 35%.
“Should oil prices stay around current levels, we might see clients revisiting their operational plans,” Hendricks elaborated. He indicated that exploration and production companies are monitoring for any potential rebound in prices closer to the upper $60s per barrel range.
“If prices linger in the low $60s, some softening can be anticipated, but I do not foresee drastic reactions from our clientele,” he added.
During a conference in Oklahoma City last week, U.S. Energy Secretary Chris Wright acknowledged the prevailing “anxiety and uncertainty” within the oil and gas sector.
“This sense of uncertainty will dissipate soon—perhaps in weeks or a few months, but I believe we will gain clarity shortly,” Wright stated while defending Trump’s trade strategies. Wright, who founded the oilfield services company Liberty Energy, noted that his business has faced a nearly 46% decline since Trump’s rise to office.
Wright contended that the U.S. reindustrialization, prompted by the current trade policies, would ultimately enhance energy demand. Speaking to CNBC, he asserted that he does not foresee any significant drop in U.S. oil production.
“Our administration does not have influence over short-term oil price fluctuations,” Wright clarified. “We are focused on reducing the costs associated with producing a barrel of oil,” pointing to Trump’s initiatives aimed at reducing regulations and expediting the permitting process.
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