Schlumberger is, as most know, a truly remarkable company. After an unprecedented string of seven quarters of activity decline, the company still managed to generate some $1.4 billion of cash flow from operations in the third quarter. Freecash- flow generation was $699 million.

What is also remarkable is the prism that Schlumberger usually provides into different segments of the global energy marketplace. While CEO Paal Kibsgaard predicted on the company’s third-quarter conference call that several international markets had either bottomed or appeared close to bottoming, he pointed to other regions still looking for light at the end of this downturn’s long, dark tunnel.

“Perhaps more than ever,” noted a Barclays research report, “the Street is relying on Schlumberger’s perspective on international upstream spending.”

This time around, however, the report said that the market was “unsettled” by the unusual “lack of clarity” during the company’s conference call. Schlumberger said “visibility remains limited” as to 2017 E&P investment, and it reiterated on the call that “a broad-based, V-shaped recovery is unlikely.”

Several comments on market dynamics stood out on the call. Looking to 2017, year-over-year growth is expected to occur in North American land drilling, Russia and the Middle East, said Kibsgaard. Europe, Africa and Latin America are expected to grow from currently very low levels, but it’s premature to say if that will translate into year-over-year growth, he continued. There were no signs yet of an imminent recovery in activity in Asia, he added.

Specific sub-regions have also experienced varied levels of activity. While North Africa showed signs of stability, sub-Saharan Africa faced challenges in terms of “the prolonged decline in deepwater activity,” with the rig count now down 75% from fourth-quarter 2014 levels. However, Kibsgaard said, the company believed this to mark the bottom of the cycle, with the exception of Angola.

Understandably, depressed oil prices have also stretched financial capacity across a broad swath of customers.

“We are now seeing widespread delays in payments across all geographies,” said Kibsgaard. “This is a clear sign of the persistent financial distress across the industry.”

Venezuela is among producers facing the most stringent pain, and Schlumberger’s operations on behalf of international oil company joint ventures in Venezuela remain “largely shut down” pending a new contract model, he added. This model would include a mechanism to assure payment, potentially leading to a resumption of operations in first-quarter 2017 if terms are finalized.

Admittedly, Venezuela is an extreme case, with inflation estimated by the International Monetary Fund to be about 480% in 2016. Its international reserves are at the lowest level since June of 1996.

Deepwater also “continues to be challenged,” with rig utilization dropping to 55% in September, noted Kibsgaard. While Schlumberger is tracking a handful of larger projects, the company’s “focus now has really shifted to the tieback market,” where it can offer a “very economical package” to tie back one or two wells to an existing host facility, he said.

As discussed in this issue’s cover story, conventional production, including deepwater, has lagged the unconventional sector in terms of lowering finding and development (F&D) costs. As a result, it has typically needed a higher price signal to bring on new supply. With F&D costs as low as $10 to $15 per barrel in the unconventional sector, according to industry experts, conventional producers are generally at a disadvantage.

With a foot in each camp—both conventional and unconventional—Anadarko Petroleum Corp. has identified the free cash flow generated by its recent Gulf of Mexico acquisition as a means to accelerate investment in its key unconventional plays in the Delaware and Denver-Julesburg basins. However, the strategy rests in part on Anadarko’s “unmatched inventory of lowcost, subsea tieback opportunities,” said CEO Al Walker at the time of the acquisition.

In the current price environment, and in the absence of tiebacks to existing infrastructure, “we’re not trying to drill opportunities that require greenfield development,” he said on the company’s third-quarter conference call.

And notwithstanding the numerous tieback opportunities that are available, Walker has made crystal clear that Anadarko’s unconventional plays stand at the top of its list of the key areas—called by some the “three Ds”—set to win major capital allocations.

“We see the Delaware, the D-J and the deepwater Gulf of Mexico as our growth engines,” said Walker. And to make sure he got his point across, he added: “in that cascading order.”

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