U.S. energy companies say they expect activity in the oil patch to rebound this year.
But despite their buoyant tone, the companies' quarterly financial results suggest the recovery from the oil market crash will be anything but easy.
So far, quarterly earnings statements from the energy sector have been riddled with reports of losses and layoffs. And analysts warn that the return to the oil fields will be done cautiously, as companies are still reeling from low oil prices.
"Despite the cautious optimism by some of these companies, they aren't ready to jump in 100 percent now," said Phil Flynn, an energy analyst with Price Futures Group. "I think there's some trepidation."
He added, "I don't think the worst is over for some of these companies."
Energy companies have struggled with low oil prices since they plunged in 2014 as a result of a worldwide glut and weak demand. In response to the drop in prices, oil and gas firms have laid off tens of thousands of workers and curtailed drilling activities to cut costs.
As a whole, energy-sector earnings are expected to be down 72 percent in the second quarter, said Rob Lutts, president and chief investment officer for Cabot Wealth Management.
Among the companies that have reported their second-quarter results so far is Southwestern Energy Co., which reported a loss of $620 million for the second quarter, an improvement from the $815 million loss the company reported a year ago.
Schlumberger Ltd. swung to a loss of $2.1 billion during the second quarter. The company said last week that it laid off more than 16,000 employees during the first half of 2016.
And ConocoPhillips has said it will lay off about 1,000 employees, or about 6 percent of its workforce this year, The Wall Street Journal reported last week.
Despite the losses and layoffs, many company executives have said they are confident that the oil slump is ending and a recovery looms.
"Today our customers are thinking about growing their business again rather than being focused on survival," said Dave Lesar, chief executive officer of Halliburton, during a conference call with investors last week. The company reported a quarterly loss of $3.2 billion.
"There is a spring in their step that I didn't see earlier in the year, and in almost every case, they are talking about adding rigs, buying assets," he said. "In short, they are getting back to business."
Southwestern Energy Co. plans to expand drilling and will add five rigs by the end of the third quarter, said William Way, president and chief executive officer, during a conference call with investors last week.
One of the rigs will return to Arkansas' Fayetteville Shale, where drilling has slowed since natural gas prices weakened in 2012.
During the boom days of the Fayetteville Shale, there were as many as 60 drilling rigs working in the formation. Now there are zero.
Southwestern Energy laid off roughly 600 employees in Arkansas, or about half its workforce in the state, in January. The addition of the rig will add jobs in the shale, but the company didn't say how many.
"The company is hiring on account of its renewed capital program, and that includes bringing back individuals who previously worked for us," spokesman Christina Fowler said in a statement.
"Our exact needs will depend on how our capital spending evolves, which itself depends on commodity prices, geographic location of projects and other factors," she said.
Companies will slowly expand drilling in the oil fields, analysts said. They also cautioned that there could be further cutbacks before the oil-price rout is over.
"There seems to be a sense that the worst is over," said Flynn. "But you still have a lot of challenges going forward."
One of those challenges is that the market remains awash with oil.
Oil prices, which rallied earlier this year, remain low. On Monday, they fell to the lowest level in three months as the market struggles with abundant supply.
The price of West Texas Intermediate crude fell 2.4 percent to $43.13 a barrel in New York, and Brent crude fell 2.1 percent to $44.72 a barrel in London.
Aggravating the market is an oversupply of gasoline. Refineries have been churning out record amounts of fuel, but now that inventories are overflowing, some fear they will reduce output, which will ultimately reduce demand for oil.
"I think some of the oil service companies may still be a little over optimistic. The world still is oversupplied with oil and petroleum product," said Andrew Lipow, president of Lipow Oil Associates LLC. "They're going to muddle along for the next six months."
Business on 07/26/2016