Oil service companies continue to see an increase in business from operators working in Iraq, as that country attempts to reinvigorate its oil and gas fields and meet its ambitious goals on production growth over the next decade.

TUTORIAL: Options Basics

Iraq Goals
Iraq has awarded concessions to many foreign oil and gas operators to help redevelop the country's huge reserves of oil and gas as part of a goal to boost productive capacity to 12 million barrels of oil per day by 2017. Iraq currently produces 2.7 barrels of oil per day according to Thamir Ghadhban, senior advisor to the prime minister, in mid July.

The Players
Schlumberger (NYSE:SLB) seems to be ahead of its competitors in establishing a presence in Iraq. The company reported that revenues from business here topped $100 million in the second quarter of 2011, and even more importantly, margins are at the average level of the entire Middle East and Asia segment. (For more on margins, read A Look At Corporate Profit Margins.)

Schlumberger attributed its success in Iraq to careful bidding on contracts, the speed in which the company completed turnkey projects, and matching resources with the level of activity.

Schlumberger expects Iraq to rank seventh out of fourteen GeoMarkets in the Middle East and Asia group in 2011, and move up to third in 2012.

Schlumberger was recently awarded a contract by Lukoil to process 3D seismic data from the West Qurna 2 Oilfield Development Project. The data will be taken from 30 wells and will be used to plan future development here. Statoil (NYSE:STO) is partnering with Lukoil at the West Qurna 2 field and the partnership expects production to reach 120,000 barrels of oil per day in 2012 and 150,000 barrels per day in 2013.

Schlumberger also received a contract from Gazprom to help develop the Badra oil deposit. The contract is for a three-year term and will involve drilling 11 wells at the field.

Weatherford International (NYSE:WFT) also had positive comments on Iraq business during the company's second quarter of 2011 earnings release and conference call. The company said that business here helped offset weakness from countries in the region that are experiencing civil unrest. (Learn what these calls are for and how to get the most out of them in Conference Call Basics.)

Weatherford International didn't disclose any revenue numbers on business in Iraq, and said that contracts here were "lumpy" due to starting and mobilization dates. The company said that it expects Iraq to be the largest source of revenue in the Persian Gulf in the future.

Baker Hughes (NYSE:BHI) did not provide much new information during its second quarter of 2011 conference call, and stated that it was focused on "production enhancement," and building infrastructure in Iraq to support the introduction of all of its product lines.

Baker Hughes also didn't disclose any new Iraq contracts in its recent earnings release. In the first quarter of 2011, the company disclosed that it won contracts from Lukoil, BP (NYSE:BP) and ENI (NYSE:E).

Halliburton (NYSE:HAL) sees potential from Iraq in the long term but reported that delays in projects and rig mobilization here is pulling margins down in the short term as fixed costs are spread over a smaller base of business. The company does expect Iraq to be one of the "fastest growing countries internationally in the coming years" and expects to receive a significant portion of this business.

The Bottom Line
The oil service industry is seeing a growing volume of business from Iraq and expects this to increase even further over the next few years. This will help diversify the industry's dependence on the growth of unconventional and shale drilling in the onshore North American market.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this article, risk free!

Related Articles
  1. Economics

    The Biggest Oil Producers in Latin America

    Find out which countries produce the most oil in Latin America, and learn about some of the biggest oil companies operating in each country.
  2. Economics

    The 9 Industries Driving Texas' Economy

    Find out which industries are driving the Texas economy. Learn about the largest and fastest growing employers and producers in Texas.
  3. Stock Analysis

    Is Now the Right Time to Buy Brazilian Stocks?

    Examine the current state of the economy of Brazil, and learn why there may be some reasons for investors to look for a rally in Brazilian stocks.
  4. Stock Analysis

    Will WYNN Continue to Rally?

    Wynn Resorts has experienced a rally recently. Will it remain a good bet?
  5. Stock Analysis

    Don't Be Fooled by the Market's Recent Rally

    The bulls won for a bit in early October, but will bears have the last laugh?
  6. Stock Analysis

    Will Twitter's Stock Find its Wings Soon?

    Twitter is an enigma to many investors, but its story is pretty straightforward.
  7. Stock Analysis

    Top 5 Companies Owned by Ford

    Discover some of Ford Motor Company's most important subsidiaries and joint ventures, and learn more about what they do to further Ford's business interests.
  8. Stock Analysis

    The 4 Best Buy-and-Hold Dividend Stocks

    Discover four of the best dividend stocks for investors to buy and hold, along with the reasons for each stocks' suitability for long-term success.
  9. Investing Basics

    How to Think About Seasonality Trends

    Investors benefit when company research incorporates seasonality trends that predict relative strength and weakness throughout the calendar year.
  10. Investing

    Why Coal Won't Go Away Anytime Soon

    Despite government regulation, more competition and higher production costs, coal remains a relatively cheap source of fuel for electricity.
  1. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  2. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>
  3. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  4. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  5. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  6. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!