Image source: Royal Dutch Shell via flickr.com.
Despite posting better-than-expected results in the third quarter, investors seem to be more worried about some of the things Schlumberger's CEO Pal Kibsgaard had to say about the oil market. As one of the largest oil services companies out there with a huge international presence, it's worth listening when the company talks about what it's seeing. Here are five quotes from Mr. Kibsgaard that can give investors a better feel for what to expect from the oil and gas market in the coming quarters.
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Recovery is still a ways offFor investors, watching for improving oil prices lately seems like waiting for Godot. So it's not surprising that Kibsgaard seems to be playing the role of Godot's messenger boy when he gave the company's outlook for the industry:
Kibsgaard isn't the only one saying this, either. Many of the integrated majors have been making similar statements and have drastically cut their capital expenditure budgets for the coming year.
Picking off the low-hanging fruitSome people could argue that production rates have remained much more robust than so many predicted once oil prices started to decline. While we have seen many companies improve cost structure and maintain production levels, Kibsgaard thinks that many of these efforts are one-time hits companies can do to give their business a jolt and ultimately delay the inevitable:
Bankruptcy won't be the panacea that so many thinkEver since the oil services space started to generate a decent chunk of revenue from hydraulic fracturing, the market for those services has been plagued by rapid swings between under- and oversupply. Today, the oversupply has put many smaller services companies to the brink. Kibsgaard does not, however, foresee bankruptcies in the oil services sector clearing the glut of equipment as much as some might have hoped:
Ambitious plans for its acquisitionSchlumberger is venturing into a new realm with the acquisition of Cameron International . The two companies have worked together on their OneSea joint venture for some time, but this will be the first time Schlumberger will have a significant presence in equipment manufacturing. According to Kibsgaard, it will lead to some considerable cost savings:
Considering the amount of cost savings that companies have started to realize recently across all different types of production, it would not be surprising if they are able to achieve profitability at lower oil prices than pre-crash.
We'll know it when we see itThere has been a lot of discussion about when the market will turn, but there is much less focus on what kind of prices it will take to start the turnaround. When asked if there was a price target he thinks will signal that turn, Kibsgaard suggested that oil companies have been burned so hard that they will likely want to see a sustainable higher price more than an a dollar target:
It may take some time before Schlumberger starts to see a rebound in revenues, but thanks to the moves it has made over the past year, it should be able to squeeze out some small profits in the downturn. When the turn does come, though, Schlumberger will be ready.
The article 5 Revealing Quotes From Schlumberger's CEO About the Future of the Oil Market originally appeared on Fool.com.
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