Barometer of Shale Oil Industry's Health Warns Agony to Get Worse
HOUSTON, Feb 3 (Reuters) - The latest blow to the energy industry's collective psyche has been inflicted by National Oilwell Varco Inc, with the giant oilfield equipment maker warning the pace of drilling and fracking will only slow more as 2016 drags on.
A 70 percent drop in crude prices since mid-2014 has affected not only NOV but dozens of others throughout North America's oil patches, prompting tens of thousands of layoffs, eroding profits, depleting state and local tax revenue and, in a handful of cases, causing bankruptcies.
As a manufacturer of rig equipment and a designer of robotics for onshore and offshore oil fields, NOV serves as a barometer of oilfield activity, giving added weight to warnings on Wednesday as it reported a quarterly loss.
"We are not planning for recovery in 2016," NOV CEO Clay Williams told investors.
He painted a grim financial picture of his exploration and production clients, which can't hedge production because futures prices show oil won't rise above $50 a barrel for years.
"Oil (has) traded into the high $20 range, levels not seen since 2003. This, combined with hedges rolling off for E&Ps, and term contracts expiring for drilling contractors, ratcheted up financial stress on our customers," he said.
The Houston-based company's commentary comes as part of a parade of pain the oil industry has put on display so far this quarterly earnings season, one that shows no sign of abating as others report in the coming days.
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