HOUSTON Oct 20, 2006 (Dow Jones Newswires)
OPEC's plan to cut crude production by 1.2 million barrels a day won't affect the services industry, Schlumberger Ltd. (SLB) Chief Executive Andrew Gould said Friday.
"OPEC is defending the price, but I don't think there is a huge danger of a price collapse," he said.
The Organization of Petroleum Exporting Countries announced its decision at a meeting in Qatar on Thursday. Front-month crude futures on the New York Mercantile Exchange settled at $58.50 that day, off $20 from their July high.
High prices in the last two years have encouraged oil companies to explore oil fields once considered prohibitively expensive to drill, including the ultra-deepwater Gulf of Mexico and reserves in Siberia.
The drilling boom has helped oil-field services companies like Schlumberger to have a string of stunning quarters. On Thursday, the world's largest services firm reported a third-quarter net profit of $999.8 million, or 81 cents a share, on revenue of $4.95 billion. Both profit and revenue were nearly double figures from the same period in 2005. Analysts' consensus forecast was for earnings per share of 77 cents on revenue of $4.94 billion.
Producers won't back off just because prices have dropped back a bit, Gould said, speaking to analysts on a conference call tied to the earnings release.
"We don't need $65 oil for our customers' spending plans to be maintained," he said. "They will maintain them at a much lower price."
Royal Dutch Shell PLC (RDSA), for example, will continue with its exploration projects in the Gulf of Mexico even if oil drops into the low $40s, John Hofmeister, president of U.S. operations, said on Wednesday.
Some projects remain feasible if oil drops as low as $20 a barrel, he said.
Gould said the task of replenishing reserves in the face of soaring demand will keep services companies busy. And demand shows no sign of slowing.
"It's true U.S. crude and product inventories are high, but if you look across the world, they're not very high," he said.
Copyright (c) 2006 Dow Jones & Company, Inc.
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