SLB Warns of Lower Spending By Oil Producers Amid Tariff Impact

SLB (formerly Schlumberger), the world’s largest oilfield services provider, on April 25, issued a gloomy outlook for 2025. The service cited lower spending by oil producers and the impact of tariffs.

During the week, SLB competitors Halliburton and Baker Hughes flagged the same concerns about weaker demand and tariff costs.

The warning came after SLB missed its Q1 profit estimates due to a significant decline in drilling activity in Mexico.

Halliburton this week warned of a second-quarter earnings hit due to tariffs and reduced North American oilfield activity. Baker Hughes projected deeper spending cuts by global producers.

SLB Q1 2025 Result

For Q1 2025, SLB reported net income that fell 25.4% from a year ago to $797 million. Adjusted earnings per share, which excludes nonrecurring items, slipped to 72 cents from 92 cents per share, missing analysts’ expectations of 73 cents.

The company also missed Q1 revenue expectations due to a “subdued start to the year” amid weakness in its well-construction and international businesses.

International revenue fell 5% to $6.73 billion, with significant slowdowns in Saudi Arabia, Russia, Offshore Africa, and Mexico.

In contrast, North American revenue increased by 8% year-over-year. Strong growth in data centre infrastructure and higher intervention activity supported North American growth.

However, Latin America’s revenue fell 10% to $1.50 billion, with total international revenue declining 5% to $6.73 billion. Sanctions impacted its revenue from Russia.

SLB noted that changes in the global economy, erratic commodity prices, and evolving tariffs will negatively impact upstream oil and gas investments.

How Tariffs Impacts SLB and the Industry

Olivier Le Peuch, SLB’s Chief Executive Officer, stated, “We expect global, upstream investment to decline compared to 2024, with customer spending in the Middle East and Asia being more resilient than other regions.”

Oilfield services like SLB, Baker Hughes, and Haliburton depend heavily on imported machinery, such as drill bits, pumps, pipes, and rigs. Therefore, President Trump’s 25% tariffs on all steel and aluminium imports will raise the cost of these materials by 25%. This would make Deepwater, shallow offshore and onshore projects more expensive.

As costs rise, international and national oil companies may become increasingly cautious about spending on upstream operations. Consequently, they may halt postponing drilling campaigns. Fewer upstream projects by IOCs and NOCs would mean less demand for drilling, seismic surveying, well completion and maintenance, layoffs or reduced R&D investment.

To adjust to this issue, SLB is optimizing its supply chains by sourcing equipment locally to avoid the 25% tariffs on steel and aluminium. It added that it would continue to trim costs and align resources with activity levels in coming quarters.

SLB’s negative outlook reflects the broader industry’s challenge, which includes weak global economic growth, lower oil prices, and tariff impacts.

The surge in cost will push service providers like SLB, Baker, and Haliburton to limit investments in next-generation technologies like AI exploration and innovative drilling systems.