Fracking’s Decade of Growth Ends as Schlumberger Exits

Fracking’s Decade of Growth Ends as Schlumberger Exits

By Avi Salzman

Sept. 4, 2020 8:00 pm ET

 

The U.S. oil boom was the most exciting growth story in energy for nearly a decade. But the exit of a major player from a big part of the business suggests that the growth story may be over. Schlumberger last week said it would unload its North American hydraulic-fracturing unit, combining it with Liberty Oilfield Services for a 37% stake in Liberty worth $488 million. Schlumberger helped transform U.S. oil exploration, making fracking more efficient and profitable and the U.S. the world’s No. 1 oil producer. But Covid-19 and years of weak results have turned investors off.

There are now fewer than 100 U.S. fracking spreads, or sets of fracking equipment, from over 400 in 2018. New Schlumberger CEO Olivier le Peuch has committed to reducing assets and focusing more on overseas business, while cutting 21,000 jobs and reducing the dividend. On Wednesday, Schlumberger shares were down 0.3%, to $18.57.

High Pressure BusinessOilfield services stocks exposed to fracking have fallen as the pandemic drove down oilprices. But Liberty surged on the Schlumberger deal.

Liberty will become the third-largest oil-service company in North America, notes Evercore. “The Covid pandemic has thrown the world for a loop, bringing serious stress to our industry, but these dark hours are most fertile for opportunity,” Liberty CEO Christopher Wright said in a conference call. But even he doesn’t think that fracking’s glory days are coming back soon. Wright expects strong free cash flow and investment returns in years ahead, even though active fracking fleets will probably remain far below their 2018 peak.

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