Oil service providers are giving up any hopes of a recovery in drilling activities in 2016 and are preparing for another year of pricing pressure as producers in most areas outside the Middle East seek further spending cuts. “Any significant recovery in our activity level will be a 2017 event,” Schlumberger chief financial officer Simon Ayat says. “The reality is, due to the macro uncertainties, many of our customers are managing their businesses in real time, rig by rig,” Halliburton chief executive David Lesar says. “Accordingly, we are going to take this market week by week and in some cases crew by crew.” With the deepest upstream spending cuts focused on North America, service firms have seen operating margins hit hardest in that region that drove the drilling boom of the first half of the decade, at the same time as overall revenues have slumped. Oil service market leader Schlumberger’s pre-tax operating margin in North America fell to 10pc in 2015, from 19pc a year earlier, while its margin in the rest of the world held up at 23.6pc, down from 23.9pc in 2014 (see table).
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