<article><p class="lead">Oil service companies are touting their energy transition plans as the Covid-19 pandemic continues to weigh on the outlook for oil and gas investment.</p><p>Leading service firms Schlumberger, Halliburton and Baker Hughes are seeing their financial results stabilize after the disastrous first half of 2020. But with the pandemic weighing on the global economy, oil and gas producers around the world are unlikely to significantly increase production to pre-Covid levels. "While the global lockdowns are evolving and vaccine development is progressing, the near-term recovery remains fragile," Schlumberger chief executive Olivier Le Peuch says.</p><p>Schlumberger's third-quarter North America revenue fell by 2pc to around $1.2bn compared with the second quarter but was down by 59pc from a year earlier, as increased drilled but uncompleted (DUC) well completions were offset by reduced drilling. Producers in the top seven US shale basins have been running through their inventory of DUC wells while scaling back on new drilling.</p><p>Schlumberger's offshore business in the third quarter was affected by reduced rig activity, lower multi-client seismic licence sales, and disruptions from one of the most active hurricane seasons in history. Oil and gas producers have largely devoted their spending to maintaining wells and returning cash to shareholders, Baker Hughes chief financial officer Brian Worrell says. As a result, drilling and completion activity in North America will "struggle to be flat" year on year in 2021, with US oil production expected to post a year-on-year decline, Worrell says.</p><p>Baker Hughes' revenue from oil field services fell by 5pc in the third quarter from the second quarter to $2.3bn, almost a third lower than in the same period of 2019. Its international drilling and completion activity for the rest of this year will fall by closer to the high end of the 15-20pc range that the company forecast three months ago, chief executive Lorenzo Simonelli says.</p><p>Oil and natural gas activity should regain a trajectory for improvement towards an eventual recovery in drilling and exploration, Halliburton chief executive Jeff Miller says. But its pace is likely to fall short of the strong business recorded in the first quarter of 2020, he says. Halliburton reported a $17mn loss in the third quarter, compared with a $295mn profit a year earlier, but an improvement from a $1.7bn loss in the second quarter.</p><h2>Playing the transition</h2><p class="lead">While the drilling rigs may be idled, oil service companies are using the time to focus on their energy transition businesses. Baker Hughes' carbon capture and hydrogen technologies can help the industry meaningfully reduce carbon emissions, Simonelli says, pointing to the successful test with Italy's Snam of a turbine powered by a mix of hydrogen and natural gas to compress and move hydrogen fuel blends through pipelines.</p><p>Le Peuch similarly touts Schlumberger's hydrogen technology venture, Genevia, and low-heat geothermal business, Celsius. "Energy transition will give us the element of growth that will give us the opportunity to expand our margins and reach and exceed our return above cost of capital," he says.</p><p>Halliburton is also looking to take part in the energy transition away from oil and gas. In a major shift, the firm plans to set and share targets for reducing greenhouse gases in its operations, Miller says. The firm's Halliburton Labs plans to take equity in start-up clean energy projects in exchange for access to Halliburton's research and business network. The programme would leverage past investments instead of using new capital. But Halliburton's main business will remain in hydrocarbons, despite the transition. "We are an oil field services company and we believe the world needs a lot of oil and gas for a very long time," Miller says.</p><p><table class='tbl-excel'><tr><td class='tbl-header' colspan='3'>Oil service firms&#39; results</td><td class='tbl-header tbl-right tbl-italic'>$mn</td></tr><tr><td class='tbl-columnheader tbl-bold tbl-left'>Company</td><td class='tbl-columnheader tbl-bold tbl-right'>3Q20</td><td class='tbl-columnheader tbl-bold tbl-right'>3Q19</td><td class='tbl-columnheader tbl-bold tbl-right'>&#177;%</td></tr><tr><td class='tbl-rowspace' colspan='4'></td></tr><tr><td class='tbl-subheader' colspan='4'>Profit</td></tr><tr><td class='tbl-left'>Halliburton</td><td class='tbl-right'>-17</td><td class='tbl-right'>295</td><td class='tbl-right'>na</td></tr><tr><td class='tbl-left'>Schlumberger</td><td class='tbl-right'>-82</td><td class='tbl-right'>-11,383</td><td class='tbl-right'>na</td></tr><tr><td class='tbl-left'>Baker Huges</td><td class='tbl-right'>-170</td><td class='tbl-right'>57</td><td class='tbl-right'>na</td></tr><tr><td class='tbl-subheader' colspan='4'>Revenue</td></tr><tr><td class='tbl-left'>Halliburton</td><td class='tbl-right'>2,975</td><td class='tbl-right'>5,550</td><td class='tbl-right'>-46</td></tr><tr><td class='tbl-left'>Schlumberger</td><td class='tbl-right'>5,258</td><td class='tbl-right'>8,541</td><td class='tbl-right'>-38</td></tr><tr><td class='tbl-left'>Baker Hughes</td><td class='tbl-right'>5,049</td><td class='tbl-right'>5,882</td><td class='tbl-right'>-14</td></tr><tr><td class='tbl-subheader' colspan='4'>North America revenue</td></tr><tr><td class='tbl-left'>Halliburton</td><td class='tbl-right'>984</td><td class='tbl-right'>2,949</td><td class='tbl-right'>-67</td></tr><tr><td class='tbl-left'>Schlumberger</td><td class='tbl-right'>1,157</td><td class='tbl-right'>2,850</td><td class='tbl-right'>-59</td></tr><tr><td class='tbl-left'>Baker Hughes</td><td class='tbl-right'>na</td><td class='tbl-right'>na</td><td class='tbl-right'>na</td></tr></table></p></article>