UPDATE 2-US oilfield firms fall on demand concerns as Aramco cuts capacity target

Tadawul All Shares Index 0.00%
SAUDI ARAMCO +0.50%

Tadawul All Shares Index

TASI.SA

12198.38

0.00%

SAUDI ARAMCO

2222.SA

29.90

+0.50%

Updates share prices, adds Halliburton declined to comment in paragraphs 4, 10

- Shares of top oilfield services provider SLB SLB.N tumbled nearly 10% and weighed on the benchmark S&P 500 index on Tuesday while its U.S. rivals fell after Saudi Aramco's 2222.SE move to lower its maximum capacity target fanned demand worries.

Aramco, the largest oil company in the world, will cut its planned maximum sustainable oil production capacity to 12 million barrels a day (bpd) after being ordered by Saudi Arabia's government. The new target is one million bpd below a target announced in 2020.

Analysts said the move could reflect a change in Saudi Arabia's outlook for global oil demand and may be followed by Aramco curbing capital investment.

Shares of Halliburton HAL.N and Baker Hughes BKR.O were down as much as 4% each before retracing some of the losses. SLB was off 7.6% and Seadrill SDRL.OL down 3.4%, both at mid-day.

Higher international and offshore oil exploration and production, primarily in the Middle East and Africa, have largely helped oilfield firms ride out slowing drilling activity by U.S. shale firms.

SLB, formerly Schlumberger, said in a filing last week that it anticipated record investment levels in the Middle East, citing the significant expansion in Saudi Arabia and nearby oil states.

The company's significantly bigger international and offshore market exposure has been a driving force behind its upbeat performance in recent quarters.

ATB Capital Markets analysts said the move would have the most impact on Saudi's offshore oil production capacity projects and jack-up companies.

"There was hope that some of the jack-ups would be built by NOV in Saudi Arabia and that plan will likely not go forward. The growth plans for the Big-3, SLB, HAL, and BKR will be negatively affected as well," ATB analyst Waqar Syed said.

SLB did not reply to requests for comment. Halliburton declined to comment.

"... a lot of the equipment/services are already locked up under term contracts, unless some have easy outs. Also, still a lot of gas-related activity going on over there," said Raymond James analyst Jim Rollyson.


(Reporting by Mrinalika Roy in Bengaluru; Editing by Sriraj Kalluvila)

((mrinalika.roy@thomsonreuters.com;))

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