Oilfield service margins are hanging in there (for now)

The Gist: The oilfield service industry remains optimistic on margins, but rig counts are starting to decline—putting pressure on fleet utilization rates. Utilization has historically been a strong coincident indicator of OFS gross margins.

---

A quick one today.

My former buyside counterpart and all-around great guy, Andrew Meister, developed a very cool SaaS tool called DoTadda Knowledge (HERE). It is an AI/LLM tool used to scrape transcripts for the summaries and answers. You may recall, my post from 6 months ago when we used it to gauge a sense of 2025 U.S. oil production levels (HERE).

I recently poised the query/prompt to “examine SLB, BKR, HAL, TS, NOV, CHX, WFRD, WHD, CLB, PUMP, INVX, OIS, and LBR and provide me a summary of what they are saying about pricing and margins.”

Here’s what DoTadda Knowledge compiled from commentary across more than 15 oilfield service companies’ 1Q results.

“All companies are navigating a softening upstream market, inflationary cost pressures and tariff‐driven input‐cost increases by leaning on productivity programs, selective price recovery and disciplined cost management. Despite constrained activity, every major player has delivered either margin expansion or resilience in Q1, and all expect further structural margin gains or stability in 2025.”

“By combining productivity-driven margin expansion, selective price recovery, and contractual pass-through mechanisms, these service and equipment providers are defending or growing profitability in the face of an uncertain macro and geopolitical outlook—setting a strong foundation for 2025 earnings stability or growth.”

Switching gears.

In the top left chart, you'll see the Producer Price Index (PPI) for Drilling Oil & Gas Wells Services (dark blue line) plotted alongside average hourly earnings in oil & gas extraction (orange line).