The oilfield services (OFS) Big Three of SLB, Halliburton and Baker Hughes could enjoy the moment of their collective post-earnings bounce last week, as investors rewarded announcements of solid second-quarter results and frank commentary on weathering a soft economy.
The moment is unlikely to last.
“Activity reductions will affect the oilfield services market this year,” Halliburton Chairman, President and CEO Jeff Miller warned analysts during the company’s second-quarter earnings call, promising to take “necessary actions” to fend off challenges to its bottom line. He also reduced the company’s guidance for future quarters.
The expectation of weak oil prices in the fourth quarter inserted gloom into the earnings calls, even when second-quarter results were strong.
“The pervasive bearishness around year-end ’25 oil prices continues to color views of the sector,” Evercore ISI wrote in a research note.
Investors, though, didn’t seem to be catching the bear vibe.
“Investor conversations suggest that while management teams were guiding [second-half 2025] estimates lower, equities may have been catching a bid off optimism that estimates were approaching a bottom if crude held at current levels,” TPH analyst Matt Portillo wrote in a July 28 research note.
SLB’s stock closed at $36 on July 28, a 3.8% increase since its earnings announcement. Halliburton’s stock closed at $22.84, an 11.2% jump, and Baker Hughes, at $46.55, enjoyed a 14.5% bump.
Portillo didn’t exactly accuse investors of displaying irrational exuberance, but he did note that market fundamentals are not pointing in that direction. An oversupplied crude market, particularly in the fourth quarter, will likely force the price down to $55/bbl, he said. WTI has lingered around $67/bbl over the past two months.
The price drop will motivate a sharp reduction in U.S. short-cycle activity to curtail production and coax the market toward balance, he believes.
Piper Sandler looked askance at the near-term market spark.
“North American stocks performed well last week, helped by a meaningful market unwind,” analysts wrote in a July 28 research note. “Perhaps investors find the North American guides more attainable, but sentiment could very well change once we begin to hear from the oily E&Ps.”
Few doubt that supply-and-demand fundamentals remain strong.
“We project, and I think, broadly, it’s projected [that] there’s solid growth in oil demand, but we also have spare capacity coming into the market,” Miller said.
The spare capacity is being supplied by OPEC, which planned to pump an additional 411,000 bbl/d onto the market in May, June and July. (The increase only totaled 180,000 bbl/d in May as some members held back to balance previous overproduction.) The cartel plans to increase output by 548,000 bbl/d in August.
Frankfurt, Germany-based Commerzbank expects a 500,000 bbl/d increase in September, which would erase OPEC’s previous cuts of 2.2 MMbbl/d.
Company responses
But the companies have time to prep for the coming challenge, and M&A is a key component of their strategies as even giants feel the need to scale up.
Baker Hughes said on July 29 that it would acquire Chart Industries for $13.6 billion, including debt. Chart focuses on thermal management, cryogenic equipment, compression systems and digital monitoring technologies, which complement Baker Hughes’ core strengths in rotating equipment, flow control and technology.
On July 16, SLB closed its $7.76 billion all-stock purchase of ChampionX. The transaction allows SLB to enlarge its presence in the production and recovery segment, which offers some protection from the cyclical nature of the industry.
Halliburton’s approach centers around tightening its belt. Miller’s plan to address expected economic softness includes:
Idling equipment, including North America frac fleets;
Cutting costs; and
A renewed focus on cash-flow discipline.
Market response
Portillo attributed investor enthusiasm for Baker Hughes to the company’s exposure to the data center/artificial intelligence sector.
And Capital One Securities agreed. “[Baker Hughes] benefited from a beat-and-raise quarter amid expectations for in-line results, signs that demand for its data center products is growing faster than expected, and evidence that its Oilfield Services & Equipment (OFSE) business is closing the margin gap to peers,” the analysts wrote.
“Hard to ignore the ‘Sword of Damocles’ dynamic in crude markets,” wrote Evercore ISI in a research note. “There are clearly multiple real-world implications of the AI-driven capital cycle underway and energy market (anchored by, but by no means limited to, natural gas infrastructure, molecules, and power) impacts continue to broaden.”
Baker Hughes made two significant sales of its NovaLT gas turbines to power data centers during the quarter. Combined, the sales of 46 units will be able to deliver 770 MW of power to data centers around the U.S., with 16 of the units located in Texas and Wyoming. Year to date, the company has booked over 70 NovaLT turbine sales for the data center market, providing 1.2 gigawatts of power.
As a sector, however, S&P’s oilfield services index has taken a 13.2% hit in 2025, trailing the S&P 500 (up 8.62%) and S&P’s E&P select index (down 3.48%.)
While share prices of the sector’s big three rose in the wake of second-quarter earnings, year-to-date returns for the oilfield services sector have lagged the E&Ps and the market as a whole. (Source: S&P Global)
Given how oilfield services have struggled in the market this year, particularly since tariffs were announced in April, some analysts anticipated better numbers from the sector in the quarter.
“We expected U.S. land stocks to outperform during earnings season given low expectations and signs of stabilization in the U.S. rig count,” wrote Capital One. “Expectations were low, but the outperformance didn’t materialize, at least in part because of some idiosyncratic beats. Halliburton provided a gloomy outlook for second half ’25, but the stock closed positive on the day and finished the week more than +6% as guidance was viewed as a worst-case scenario.”
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