In addition to technologies that aim to enhance production from shale oil and gas fields, Schlumberger has also found creative ways to reduce costs and bolster its margins.
For example, the company unveiled a plan to improve the reliability of its pressure-pumping fleet and reduce maintenance costs by redesigning the consumable part of the pump and installing this upgrade during regularly scheduled maintenance. Management expects its entire fleet to receive this pump upgrade by the end of 2014 and to fund these equipment improvements from ongoing operations.
This approach contrasts to Halliburton’s capital-intensive Frac of the Future initiative, which involves upgrading the company’s fleet to its longer-lived and more efficient Q10 pump.
These efforts appear to be paying off in the form of improved margins and market share. During a conference call to discuss Schlumberger’s third-quarter results, CEO Paal Kibsgaard indicated that the firm activated four additional pressure-pumping units from its operating fleet to support recent contract wins.
That being said, Kibsgaard also emphasized to analysts that the North American offshore market would be a more important upside driver for the company:
Analyst: So from your standpoint, then, if I were to – and if I understand what you’re saying correctly is that irrespective of the excess capacity in the marketplace that may exist – that may continue to exist, given your internal drivers, you feel very confident about your ability to get margin improvement?
CEO Paal Kibsgaard: Well in the pressure pumping business, not dramatically, right, because pricing is actually still going down. But as long as we can offset that with new technology and operational efficiency, there is potential to get some improvement in margins in pressure pumping. But obviously, what helps our margins as well is the strong offshore business and also a good drilling and characterization business on land, where the pricing pressures have been less than what we’ve seen in the pressure pumping.
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