Analysis-Services firms feel the squeeze as oil rally from Iran war fails to spur drilling

Industry Overview - Global oilfield services companies are facing a decline in earnings due to the ongoing Iran war, which disrupts energy infrastructure in the Middle East and causes producers to delay new drilling activities until oil prices stabilize [1][6] - The Brent benchmark crude oil price has surged by 53% since February 27, following U.S. and Israeli strikes against Iran, typically making oil and gas projects more profitable [2] Impact on Operations - Security risks and infrastructure damage from the Iran war have led to a significant drop in activity and reduced demand for oilfield services and equipment in a key energy-producing region [2][3] - The offshore rig count in the Gulf has decreased by approximately 39%, falling to 72 rigs as of March 27, down from 118 rigs before February 28 [4] Challenges Faced - Idled rigs, slower crew mobilizations, and increased logistics and insurance costs are disrupting operations, leading to project delays and reduced utilization [3][5] - A prolonged closure of the Strait of Hormuz could severely hinder crew mobilizations and create logistical challenges for equipment movement, further complicating operations in the region [5] Company Earnings Impact - Major oilfield services firms, including SLB, Halliburton, and Baker Hughes, are experiencing immediate impacts on earnings due to decreased activity in the Middle East, with SLB expecting first-quarter revenue to fall below expectations and a 6-9 cent-per-share earnings hit [6][7] - Smaller rivals that have invested in the region are also feeling the financial squeeze as producers exercise caution in their operations [7]