The world's largest oil field services firms hope to build on recent gains in international markets, even as the Middle East war clouds short-term outlooks.
SLB and Halliburton cite growing confidence regarding overseas opportunities, buoyed by contract wins across multiple jurisdictions, with offshore projects emerging as a key driver of growth. That push is also being supported by a growing conviction that disruption stemming from the US-Iran conflict will lend urgency to efforts to bolster energy security for years to come, as countries seek to replenish commercial and strategic reserves, diversify supplies and develop their own resources.
While prospects for a recovery in the Middle East have been dimmed by the latest escalation, after an initial peace deal unravelled, the region is shaping up to be a major source of production growth once tensions ease. There is an urgency on the part of national oil companies to get back to work, Melius Research analyst James West says. "The labour forces are localised, the equipment hasn't been damaged, so it's all ready to go as soon as we get the all-clear," he says. "The resurgence in the Middle East is going to be strong."
Baker Hughes expects the overall hit from Mideast Gulf disruption to be modest, but it does see some increases in "logistics and inflationary pressures" at its regional facilities this quarter. Activity resumed in several Middle East countries last quarter, although operations in Iraq remain bogged down by security challenges, according to SLB. "While uncertainty persists, we continue to work closely for our customers to gradually restore activity," chief executive officer Olivier Le Peuch says. "That said, returning to full activity will take time, and the pace of recovery will vary by country, customer and operating environment."
Final investment decisions for long-cycle projects are expected to increase by 30pc this year, according to SLB, citing third-party forecasts. "This will support higher exploration spending and upstream [capital expenditure] growth across the product markets during the second half of 2026, led by Africa," says Le Peuch, who expects "a more meaningful impact in 2027". Baker Hughes says upstream customers remain focused on maximising output from existing assets while retaining the flexibility to respond to changing market conditions.
Shale going global
While there are signs that the key North American onshore market is stabilising, there was some disappointment among investors as to the pace of the recovery. That may reflect the effects of US shale sector consolidation that has concentrated ownership in the hands of the biggest operators, which are generally less responsive than smaller firms to short-term oil price swings.
Halliburton has doubled down on a returns-focused strategy, with its willingness to redeploy shale equipment to international markets setting a high bar for reactivating fleets in North America. "Halliburton is taking the view that shale is globalising, and so their equipment is going to be needed in the Vaca Muerta in Argentina, probably the UAE, and in Australia and other areas where shale is proliferating," Melius' West argues. These markets offer better growth prospects than North America's maturing shale sector.
Recent efforts by services firms to branch out into power markets and data centres are also paying off. For example, Baker Hughes is expanding its gas turbine and generator capacity after orders with its unit that covers power systems and LNG doubled on the year in the second quarter. "Power markets are definitely now a new earnings line for the oil services industry," West says. "They're all in that market now — it's growing, it's visible, it's real."
