An emerging theme we are focusing on is the early stage of a major capex upcycle in America's oil patch, with even Goldman now moving in that direction andforecasting a boomthatcould echo the industry's expansion cycle of the early 2000s.
Continental Resources CEO Doug Lawler was thefirst of the major oil patch playersto mention in early April that "Continental is increasing our capital budget, which will increase production."
Now, another giant of the oil patch, Halliburton, a major supplier of the gear, crews, and services that keep drilling and fracking going, reports new signs of life in oilfield activity across North America.
"While these calls are not for committed crews, they do suggest incremental demand is building in spot markets with smaller operators. This is the leading edge of capacity tightening. While we are in the early innings, in my view the setup for North America is constructive. Premium equipment is already tightening,"Halliburton CEO Jeff Miller told investors in the company's first-quarter earnings statement earlier today.
Halliburton reported strong international performance, especially in Latin America, where revenue jumped 22% year over year, helping to offset disruptions in the Gulf area. The company still beat Bloomberg Consensus expectations on adjusted earnings, though the conflict in the Middle East reduced profit in its drilling and evaluation units by about 2 to 3 cents per share.
Melius Research analyst James West noted that Halliburton "posted a solid beat across the board" that was "driven by international strength that more than offset continued North America softness."
Miller's comments about signs of life returning to the oil patch add to remarks made by Continental Resources CEO Doug Lawler earlier this month.
This leaves us asking whether a broader shale response is still to come...
Answering that question is a team of Goldman analysts led by Michele Della Vigna, who now expects "the sector is poised for a major oil capex upcycle, similar to that of the early 2000s."
We must point out that theoil patch has yet to respond to WTI futures topping $110 a barrel, before sliding to $83 a barrel. WTI tradnig around $89 on Tuesday morning.
Source: ZeroHedge News
