Upstream investment this year is expected to see its first dip since the pandemic, but oil service firms such as Halliburton and SLB say an eventual recovery is inevitable, given forecasts for oil demand to grow sharply in coming years.
A recent warning from the IEA that almost 90pc of upstream spending has gone on offsetting natural decline underpins the case for greater investment in the sector. In the meantime, service firms have found a side hustle in jumping on the artificial intelligence (AI) bandwagon to help power data centres.
Halliburton, the biggest provider of hydraulic fracturing (fracking) services, expects North America to be first to bounce back from the drilling downturn, given recent cycles. Although the timing of the recovery is uncertain — and the company forecasts North America will be "flattish to down a little bit" next year — chief executive Jeff Miller wants to be ready to take advantage of the eventual upturn with equipment that has been set aside for the time being. "When it comes, we're going to want those fleets available to fill in gaps and actually take on some bigger work," Miller says.
Liberty Energy, the fracking company founded by US energy secretary Chris Wright, says oversupply of global crude is expected to peak in the first half of 2026. Many shale producers are targeting relatively flat output, which will require a modest pick-up in activity. And long-term natural gas demand and well completion activity remain supportive. "Together, these factors set the backdrop for improving frack fundamentals later in 2026, assuming commodity futures prices remain supportive," Liberty chief executive Ron Gusek says.
But SLB chief executive Olivier Le Peuch predicts that international markets will lead the next recovery, given the "challenged economics" of some North American basins and continued consolidation in the shale sector. "Deepwater has a very solid pipeline that drives the international growth," he adds.
Halliburton is navigating commodity price volatility by targeting $100mn in quarterly savings, planning to slash spending by 30pc next year, and continuing to retire, relocate and idle fracking equipment that does not yield sufficient returns.
Halliburton sees a number of factors coming together that will eventually pave the way for a bounceback in activity. Upstream spending in North America is below levels required to maintain crude production, while the Opec+ group is returning supplies to the market and output in Mexico is falling. Eventually "that creates a real inflection point", Miller says. The tighter market this may ultimately lead to prompts Halliburton to predict the "snapback will be super strong for us".
Data with destiny
While demand for conventional oil services weakens in the meantime, service companies are looking to tap the surge in the power needs of the data centres behind the AI boom. Halliburton recently disclosed a 20pc stake in VoltaGrid, teaming up with the provider of distributed power to supply data centres in international markets, beginning with the Middle East. SLB says its revenue from data centres doubled on the year in the third quarter. And Liberty's shares jumped by 28pc the day the company announced plans to more than double power generation capacity to more than 1GW through 2027.
But Liberty's Gusek questioned how the White House can expect to win the race for AI dominance, given President Donald Trump's aggressive tariff stance, and urged the administration to reverse course. "Winning this race requires access to massive amounts of new power generation capacity and associated hardware, along with many other sophisticated components," Gusek says. "Much of this is currently made overseas and much of it is now subject to tariffs."
