Oilfield Service Companies Fall Back On Digital Strategy As Revenues Tumble

Baker Hughes, Halliburton and Schlumberger have been hit hard by the economic downturn. However, their commitment to a new digital strategy has not waned. All three firms are moving to open-source their platforms, change to SaaS business models and become more collaborative with clients and competitors.

Baker Hughes, Halliburton and Schlumberger reported a combined net income (loss) of -$18.6 billion in 1Q 2020. The far-reaching effects of Covid-19 have significantly damaged the oil sector in 2020, in turn hitting their service providers hard. Despite these large losses, in their 1Q 2020 investor calls, the CEOs of Baker Hughes, Halliburton and Schlumberger all stressed the importance of their digital strategies, which are now more important than ever for two reasons.

The importance of digital capabilities during Covid-19

In the short term, oil companies and service providers need to operate oil wells remotely due to social distancing measures. Their geoscientists and engineers also need to access large datasets and complex software models from their home offices. Digital technologies such as sensors, IoT communications, cloud computing, automation, machine learning, drones and augmented reality are helping the world’s oil companies ‘keep the lights on’ through remote operations and data analysis. Software is also important for the OFS firms because they claim that their digital businesses will bounce back fastest and lead the recoveries of their wider businesses. Profit margins for software businesses can be two to three times those of hardware businesses.

With or without the Covid-19 pandemic, the trend toward digitalization of heavy industries such as oil and gas is clear. In fact, the OFS CEOs expect the pandemic to accelerate digital adoption for many customers. Senior executives have more time now to trial new technologies and run pilot schemes. And the need to cut operating costs and streamline the workforce is greater than normal. Schlumberger and Halliburton spoke of two large clients that have accelerated their move to cloud computing and software purchasing, even during the downturn (Woodside and Pertamina, respectively).

 

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