SLB sees tough times in 2025 owing to oil oversupply, tariffs, OPEC+ crude releases

Rough sailing is anticipated for upstream oil and gas producers during the rest of 2025 as lower global E&P spending in an already oversupplied oil market is compounded by higher US import tariffs and sizable releases of OPEC+ crude, the top executive of oilfield services purveyor SLB said April 25.

In the meantime, continued uncertainty lingers over oil markets from the multiple threats, which in turn have caused upstream producers to become conservative on spending and activity, CEO Olivier Le Pench said during his company's first-quarter earnings call.

"The industry is navigating global economic uncertainty," stemming from the oil supply-demand imbalance, OPEC+'s recent statement that it would increase its production beginning in May, and tariff announcements" in early April by US President Donald Trump, Le Peuch said.

"In this environment, commodity prices are challenged -- and until they stabilize, customers are likely to take a more cautious approach to near-term activity and spending," he said. "At this point, we expect global upstream investment to decline compared to 2024, with customer spending in the Middle East and Asia more resilient than other regions across the rest of the world."

All that adds up to a probable lower liquids demand than originally expected for 2025, he said.

SLB, the former Schlumberger, has had a "soft start" in 2095, with a solid performance in North America whittled down by lower drilling activity in some international markets.

'Strong' North America results

"Overall, across the business, first-quarter revenues decreased by 3% year on year as our strong results in North America were more than offset by lower revenue in the international markets," Le Peuch said. He attributed the North American results to a combination of lower drilling activity in Mexico and Saudi Arabia and a "steep" decline in Russia.

Excluding those declines, international revenue was 'steady" year over year, Le Peuch said. "We achieved double-digit growth in a number of markets, including the United Arab Emirates, North Africa, Kuwait, Argentina and China as well as a solid performance in Europe and Scandinavia," he added. "Altogether, this resulted in international rig count outperformance."

Total company revenues in Q1 were $8.5 billion, down 9% sequentially and down 3% year over year. That includes North American revenues of $1.7 billion, up 8% year over year, but down 2% sequentially, and international revenues of $6.7 billion, down 5% year over year and down 10% sequentially.

The Baker Hughes international rig count averaged 903 in Q1 2025, down 2.5% from Q4 2024, although the declines were compensated by a North American rig count that rose 2.7% to 803 in Q1.

With respect to tariffs, SLB is protected from a hard landing by its activity mix, with about 80% of its revenue derived from international markets, and a diversified supply chain network that includes in-country manufacturing and local sourcing, CFO Stephane Biguet said.

Potentially exposed to increasing tariffs

But it is still potentially exposed to increasing tariffs, mostly from imports of raw material into the US in its Production Systems division, as well as exports from the US subject to retaliatory tariffs, Biguet said.

"Under the current tariff framework, the majority of the impact is on import and export flows between the US and China," he said. "So any resolution or conversely, escalation between those two countries can significantly impact the tariffs."

To minimize any tariff impacts, SLB is taking proactive steps that include further optimizing its supply chain and manufacturing network as well as "diligently" pursuing all applicable exemptions, he added. The company is also engaging with customers to recover tariff-induced cost increases through contractual adjustments.

"We've made progress on all these fronts in the last two weeks, and are stepping up those actions across the organization as we speak," Biguet said. "As the second quarter progresses and ongoing trade negotiations continue, we will hopefully gain better visibility of where tariffs may settle."

A bright spot on the horizon for SLB is digital equipment and services, which help upstream customers reduce cycle time, improve performance and drive efficiencies. SLB will continue to pursue opportunities in AI (artificial intelligence), cloud computing and digital operations, Biguet added.

And beyond oil and gas, low carbon investments are an area of growth for most large oilfield service providers including SLB, particularly in carbon capture, as well as a rapidly growing data center infrastructure solutions business.

Another growth area is production solutions as E&Ps seek to offset declines and maintain or grow production from maturing assets, Le Peuch said.

Production Systems a 'strong' growth area

"This is an area that will continue to present strong opportunities" for the company, he said. Production Systems posted Q1 revenue of $2.9 billion, up 4% but down 8% sequentially.

In addition, SLB's other three major business divisions are well construction, reservoir performance and digital & integration.

In the first quarter, SLB's net income was $797 million or 58 cents/share, down 9% sequentially and down 3% year over year as Le Peuch earlier stated.

Le Peuch also said that SLB's pending nearly $8 billion purchase of ChampionX, a chemicals business aimed at enhanced production from wellbores, should close in late Q2 or early Q3 2025.