Two major oilfield service companies announced Friday they anticipate increased investment in oil exploration and production activities as ongoing Middle East conflicts create supply chain disruptions and highlight the importance of energy security.
SLB and Baker Hughes, both industry leaders in providing equipment and services to oil and gas companies, reported their expectations during earnings calls as global markets grapple with supply shortages caused by regional warfare.
The ongoing conflict involving the U.S., Israel, and Iran has blocked approximately 20% of global oil flows through the now-shuttered Strait of Hormuz, eliminating 9 million barrels per day from production. This disruption has forced Asian and European nations to seek alternative supply sources while raising concerns about energy independence.
“There is a growing need for increased upstream investment to expand global production capacity and ensure we can meet rising demand,” stated Lorenzo Simonelli, Baker Hughes’ chief executive, during the company’s earnings discussion. Simonelli indicated he anticipates faster decision-making on liquefied natural gas projects across North America.
SLB’s chief executive Olivier Le Peuch predicted that numerous nations will focus on supply diversification once hostilities end, with increased funding for exploration projects throughout North America and Latin America, including deepwater offshore developments.
Le Peuch also forecasted that oil prices will remain elevated compared to pre-conflict levels even after the war concludes.
Both companies experienced substantial revenue decreases in their Middle East and Asia operations during the first quarter. SLB’s regional revenue fell 10% to $2.69 billion, affected by Qatar’s force majeure declaration on gas exports, production limitations, and security issues in Iraq and regional offshore operations.
The company projects the conflict will reduce second-quarter earnings by 6 to 8 cents per share, though revenue from other international markets may partially offset these losses.
Baker Hughes saw its regional revenue drop 19% to $1.15 billion during the quarter. The Middle East represents the largest market for both companies, generating more than one-third of their quarterly revenue.
Market response was positive, with Baker Hughes shares reaching $68.61, their highest point since 2007, while SLB shares climbed to $56.55, the highest since 2023.
Halliburton, another major player that released results earlier this week, reported a 12.7% decline in Middle East revenue due to reduced Saudi Arabian activity and decreased drilling services in Qatar. The company warned that disruptions from the conflict and strait closure could decrease current-quarter earnings by 7 to 9 cents per share, citing increased logistics expenses and raw material costs from supply rerouting.
Industry analysts anticipate that post-conflict infrastructure repairs will create significant demand for the sector. Rystad Energy estimates reconstruction costs could reach $58 billion.
“We anticipate seasonal recoveries around the world and a resurgence of activity in the Middle East as the conflict winds down. 2027 and 2028 are expected to be strong years of growth given the change in oil market fundamentals due to the Middle East conflict,” commented James West, an analyst with Melius Research.
Financial results showed SLB’s net income decreased 5.6% to $752 million for the quarter, while Baker Hughes’ adjusted net income rose 12% to $573 million.
