April 18, 2018 / 3:28 PM / a year ago

Oilfield service firms' first-quarter results likely to disappoint investors

HOUSTON (Reuters) - Winter storms and overcapacity in fracking equipment are expected to limit oilfield service companies’ revenue and profit gains in the first quarter, postponing Wall Street expectations for a strong pickup in results to the second half of this year.

A pump jack stands idle in Dewitt County, Texas January 13, 2016. REUTERS/Anna Driver/Files

Companies that provide services and equipment to the oilfield sector have spent the past year eyeing a comeback, as oil prices recovered to around $67 a barrel from lows around $26 a barrel two years ago.

Some companies expanded fracking capacity in anticipation of stronger demand. While a few were able to swing to a profit last year, many are still struggling to raise prices for their services.

Schlumberger, the world’s largest oilfield service firm, is expected to report on Friday that it earned 37 cents per share, up about 12 cents from a year earlier but off 11 cents from the fourth quarter, according to Thomson Reuters I/B/E/S.

Halliburton, which in February warned that weather-related delays of frack-sand deliveries could cut 10 cents per share from its profit, is anticipated to report earnings of 41 cents per share, up 37 cents from a year ago but down 12 cents from the final quarter of 2017. General Electric’s Baker Hughes is expected to post a profit of six cents per share, down from 15 cents in the fourth quarter.

“There were substantial improvements in the second half of last year, but we took a surprising pause in the fourth and first quarters due to winter impacts,” said Colin Davies, a senior research analyst at Bernstein.

The headwinds have prompted banks to cut price targets for some oilfield service companies. Last week, JP Morgan lowered its target prices for some of the largest oilfield services firms by $2 per share.

The companies that frack wells will face greater scrutiny this quarter, analysts say, as investors worry about the rapid expansion of U.S. hydraulic-fracturing fleets.

Keane Group, Liberty Oilfield Services and ProPetro have announced plans to expand their fleets. In March, shares of ProPetro fell by almost 13 percent after the company missed a profit estimate and said it would add two fleets to its pressure pumping offerings.

“The pricing tailwind for pressure pumpers feels like it has lost a lot of momentum” said Byron Pope, a managing director at investment bank Tudor Pickering Holt & Co.

Keane is forecast to post a profit of 22 cents per share, down 12 cents from the prior quarter but up from a loss of 34 cents in the same period last year. Sequentially, its revenues are anticipated to be flat at $502.3 million, according to Thomson Reuters I/B/E/S.

Reporting by Liz Hampton; Editing by Gary McWilliams and Paul Simao

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