HOUSTON – The long financial drought that has deeply bruised energy service companies may be nearing an end.
As oil prices hover near $50 a barrel, record oil company spending cuts the past two years could give way to a slight boost in investments over the next six months, and nearly three quarters of drillers now plan to pour more cash into oil and gas fields in 2017, according to a new survey of oil companies by investment bank Evercore ISI. A third of the companies planning to boost spending next year expect to increase their budgets by more than 25 percent.
Those oil field investments are the lifeblood of service companies like Schlumberger and Halliburton that provide equipment and crews to oil companies. The service companies employ the bulk of Houston’s oil workers, and they have cut tens of thousands of jobs after oil prices crashed. Global oil producers this year are projected to spend less than $400 billion for the first time since 2009.
“A strong recovery for North America is in the cards,” said James West, an oil field services analyst at Evercore. If oil prices climb into the $50 to $55 a barrel range later this year, then two-thirds of the oil companies surveyed around the world would increase their spending more than 10 percent in 2016.
West said land drilling contractors are starting to see more interest in drilling rigs – interest that could soon turn into contracts. Meanwhile, firms that help oil companies bring wells into production are reporting an increase in work as drillers tap into wells they bored but left dormant as oil prices crashed.
The $13 billion that stock-market investors have poured into U.S. oil companies and the increase in oil-price hedging is giving the drillers more financial running compared to the months when crude prices still languished below $40 a barrel.
On Friday, oil field service company Baker Hughes said the number of rigs drilling for oil in the United States increased by nine, the oil rig count’s largest increase since December.