US oilfield firms slip as Aramco's lowered capacity target sparks spending cut concerns

SAUDI ARAMCO -0.17%

SAUDI ARAMCO

2222.SA

29.00

-0.17%

- Shares of top oilfield services provider SLB SLB.N tumbled about 7% and those of its U.S. rivals fell after oil giant Saudi Aramco 2222.SE said it would lower its maximum capacity target.

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 more than 4% each. Shares of other energy services companies like Transocean RIGN.S and Seadrill SDRL.OL were down about 2.6% each premarket

Oilfield firms have been riding rising international and offshore oil exploration and production, primarily from the Middle East and Africa, as U.S. shale firms keep a tight leash on drilling activity.

"The move seems a bit bizarre and I’m sure will hammer the stocks today. But 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.

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

SLB and Halliburton did not immediately reply to requests for comment.


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

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

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