To readers, this was the email I sent out to my free subscriber list last week. If you are a subscriber to that list you may have already seen this email. I will be more content to this channel as time allows. Thanks.

It has been a few weeks since I have written a missive.

This week's news and reports by oilfield service giants Schlumberger and Halliburton deserved comments so we are back to writing to you.

One of the facts I have pointed out is that although oil and natural gas prices have moved substantially higher we have not seen a resurgence in new drilling and completion of wells.

That seems to be changing based on SLB and HAL's recent Q1 reports.

From the (SLB) call:

•All Divisions and Areas grew year-on-year, resulting in 14% overall growth. This was achieved through double-digit revenue growth internationally, and by fully capitalizing on our North America exposure with 32% revenue growth.

•Second, the elevation of energy security as a priority will drive further capacity expansion and optionality to deliver a more diverse oil and gas supply.

•Third, favorable conditions for product and services net-pricing improvements have clearly emerged and are expanding across both North America and the international markets.

•The second half of the year is shaping up to be particularly strong, based on our view of a significant pipeline of customer activity, upcoming product backlog conversion, and the growing impact of net pricing.

Comments from the (HAL) call:

•International revenue grew 15% compared to the first quarter of 2021, with activity accelerating across all international markets.

•In North America, revenue grew 37% year-on-year with the acceleration of both drilling and completions activity. Higher utilization in March and net pricing gains drove margin expansion despite weather and sand disruptions earlier in the quarter.

•Tightness in North America is not just in hydraulic fracturing equipment. It exists across the whole oil and gas value chain, in spare parts, engines, electronics, and many other inputs that cost more and are sometimes, not immediately available.

These are great results from two of the industry leaders. The forecasts for continued recovery in the sector were consistent not only with these reports but across the industry.

The risk here is that continued recovery in the oilfield services sector will be incumbent on a sustained higher price for oil and natural gas which will allow Exploration and Production companies the ability to recycle excess cash back into new production.

Currently, we have oil around $100/bbl and natural gas over $6/mcf. Prices at this level will be sufficient to maintain a recovery in the OFS sector which has the potential to overperform as it has lagged behind other energy sub-sectors.

In the AIA newsletter, we have taken positions in a couple of smaller Canadian based which I feel have the potential to 3-5x.

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Actionable Intelligence Alert

Is An Oilfield Recovery Happening