Leaders of some of the oil industry’s top oilfield service companies seem unanimous in beliefs that 2018 will bring better days for the industry.

Increased E&P spending, strong global demand, rising commodity prices, falling sand costs and more LNG activity are among the positives that could lie ahead for the industry as it emerges from a market downturn equipped with more technology and knowledge on how to operate more efficiently.

The CEOs of oilfield service giants Schlumberger (NYSE: SLB), Halliburton (NYSE: HAL) and Baker Hughes, a GE company (NYSE: BHGE), kicked off the latest round of earnings reports this month. Alongside news of sequential revenue gains in fourth-quarter 2017, the executives shared optimistic outlooks for the year ahead.

“I am very excited about the way 2018 is shaping up,” Halliburton CEO Jeff Miller said Jan. 22 during the company’s earnings call. “Commodity prices have moved up. North America unconventional activity should be very busy, international markets are starting to show signs of life and our value proposition is resonating with our customers.”

Halliburton reported about $5.9 billion in revenue, including $3.4 billion from its North American operations where Miller said demand for the company’s completions equipment and service remains strong. He believes 2018 will shape up to be a busy year for the U.S. land market and demand for horsepower will continue growing.

Oil drillers added 12 rigs this week, boosting the count to 759, BHGE said in its Jan. 26 rig count report. The gain is the biggest weekly increase since March, according to Reuters.

“Rigs continue to get more efficient but more importantly completions intensity continues to grow with longer laterals and tighter spacing,” Miller said. “As a result, I believe that the rig count to frack spread ratio has narrowed such that today this ratio is nearly 2 to 1. Think about that for a minute. It’s gone from 4 to 1 to 2 to 1 in four years.”

Miller also said he believes the trend of using local sand such as in the Permian will rise as additional capacity is activated, which should ultimately bring down sand costs.

Expectations that E&Ps will ramp up spending also adds hope for the oilfield service companies.

Schlumberger CEO Paal Kibsgaard referred to third-party surveys, which “predict another 15% to 20% increase in North America investments in 2018 while the international market is poised for growth for the first time in four years with a forecast of 5% increase in E&P spend.”

U.S. financial services firm Cowen & Co., a U.S.-based financial services firm, said 26 of the roughly 65 E&Ps they track have provided 2018 capex guidance that indicates a 7% increase in planned spending compared to 2017, a Reuters report said.

Kibsgaard also noted that some U.S. E&P companies have indicated they will invest within cash flow.

“However, with positive oil market sentiments and the increased availability of cash, we expect another year of robust growth in North America shale oil production, which will be required to maintain the balance in the global oil market,” Kibsgaard said. “The reason for this is that the aging production base in Latin America, Africa and Asia continues to show underlying production decline after three years of unprecedented underinvestment.”

This trend will be marked by nearly 2 million barrels of long-cycle production additions from previous cycle investments, he said. “These production tailwinds are expected to drop by around 1 million barrels per day in 2019, which means that the affected decline in the rest of the world is set for a significant acceleration in 2019 and beyond even if investment levels start increasing in 2018.”

For BHGE, CEO Lorenzo Simonelli said the company’s outlook remains positive.

“Early indications of customer capital spending are encouraging, particularly for our short-cycle businesses. The recent strength in commodity prices underscores this view,” Simonelli said. “However, we do expect markets for our long-cycle business to continue to lag. We expect strength in our oilfield services business driven by our well construction product line and increased completions activity as operators work down the drilled but uncompleted well inventory in North America.”

The executives also had favorable outlooks for the international markets.

“I am encouraged for the first time in three years,” Kibsgaard said on the topic. “Green shoots are appearing in the form of more tender activity and constructive conversations with customers.”

He also said the number of offshore final investment decisions is “on the positive trend,” adding to the company’s optimism for the offshore and international markets for 2018.

Velda Addison can be reached at vaddison@hartenergy.com.

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