U.S. oilfield service firms are facing significant challenges following President Donald Trump’s recent tariff announcement, which is disrupting supply chains and contributing to a decline in oil prices.
Analysts predict that the combined effects of the tariffs and lower oil prices could lead to a drop in drilling activity, placing additional pressure on major oil services companies.
Financial services firm Morningstar downgraded its fair value estimates for the three largest oilfield service firms—SLB, Halliburton, and Baker Hughes—by 3-6% following the announcement of the tariffs. The firm warned that these companies could see a 2-3% decline in oilfield revenue in 2025. For each dollar lost in revenue, Morningstar estimates these companies could lose between $1.25 and $1.35 in operating profit.
The tariffs, which are expected to impact crucial components such as pipes, valve fittings, and sucker rods, are particularly concerning for these firms, which rely on multinational sourcing strategies, according to Rystad Energy's Ryan Hassler.
Shares of the major oilfield service firms took a hit on Friday. SLB, the world’s largest oil services company, saw its stock drop by 12%, reaching its lowest point since September 2022. Halliburton’s stock fell by 10%, while Baker Hughes’ shares tumbled by 11%.
In addition to the tariff challenges, oil prices also took a sharp dive after China— the world’s largest crude oil importer—escalated tariffs on U.S. goods. This move sparked concerns about a global recession and a subsequent dip in oil demand. Crude oil futures were down more than 8% in afternoon trading, with global benchmark Brent crude falling to $64.03 per barrel and U.S. West Texas Intermediate crude (WTI) hitting $66.90.
If WTI remains in the $60 per barrel range for an extended period, it could lead to reduced activity in the U.S. shale sector by the second half of the year, Rystad’s Hassler warned. Investment bank JP Morgan has raised the probability of a global recession by the end of the year to 60%, up from 40% previously.
"The curtain appears to be falling on global trade as we knew it," said Tamas Varga, an analyst at PVM Oil Associates. "The threat of recession is front of mind, and investors are retreating from risk assets such as oil and equities."
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