Service & Supply | Quarterly / Earnings Reports | Oilfield Services | First Quarter (1Q) Update | Frac Markets - Pressure Pumping | Financial Results | Offshore | Capital Markets

Superior CEO: 'Considerable Uncertainty' Remains Due to Investor Pressure on E&Ps;

Share Print Bookmark    |    Wednesday,April 24,2019

Superior Energy Services reported its Q1 2019 results. Below are the highlights from its report and conference call.

Similar to the Q1 reports for Schlumberger and Halliburton, Superior saw North America activity drop as E&Ps strive to live within their means. The company noted that it operated fewer pressure pumping fleets in Q1 due to weak pricing.

See Also: Top Service Company Talks Technical, Financial Problems Facing Fracing

North America: 'Considerable Uncertainty' Remains

Superior CEO David Dunlap underscored that things remain "considerably uncertain" for the North America service market due to E&Ps uncertain 2H19 plans. 

• Dunlap commented, “There remains considerable uncertainty around the North American service market this year, primarily due to the lack of visibility we have into our customers’ plans for capital expenditures during the second half of the year. Until we can gain confidence that our customers’ spending levels will support utilization and pricing levels that justify maintaining our assets in the field, an increasing proportion of our capital expenditures will be allocated toward offshore and international opportunities. Overall, we are committed to a level of capital discipline that will foster free cash flow growth and improved corporate returns."

Investor Pressure on E&P Spending to Blame

Like the other service companies, Superior noted that much of the market instability can be attributed to E&Ps living within cash flow as investor pressure mounts.

Raymond James' Marshall Adkins asked: "Oil prices are up over 20%, but you kind of started off talking about the lack of visibility. So, could you help me reconcile those two things? Is it just the lag factor between U.S. operator saying, hey, wait a minute. The 20% move includes a big deal for their profitability, their cash flows before that translates to activity, or is there something else going on there? So just help me reconcile those two things."

• Dave Dunlap replied: "Yeah, Marshall, I mean it's -- it is certainly different behavior from a large part of our customer base than what we've seen in the past. Historically, when we see better commodity prices than those that were originally budgeted, the resulting increase in cash is invested by our U.S. land operators. And that it's not apparent that, that is going to be the action that we see from those operators in 2019. I think it's well documented the pressure that our customers are under from their investor base to improve returns and generate free cash flow. And I think that their desire to please their investors and improve their equity prices, are causing a bit of a behavior change that we've not witnessed in the past."

Offshore Activity "Will Improve"

Offshore activity (notably completion tools in the GOM) was also lower than expected for Superior, but Dunlap noted that he believes the US offshore market will improve "as the year progresses." International activity remains stable.