Earnings season is showing many positive signs for the oil industry. The earnings quarter vs quarter show improvements and expenses are down year over year. This good news could help with the explorers over the near term but weakening demand for oil globally could keep the companies in a declining pattern for longer. Fracturing in OPEC's willingness to cut more production and a fracking resurgence in the US should keep a lid on oil prices, and subsequently share prices of oil and gas explorers.
Not all of this should be seen as bad news. A longer term outlook is starting to show the deterioration of production capacity as a result of the cuts in capital expenditures that took place at the end of last year. Oil inventories are decreasing in the US which will eventually result in more volatility in the price of oil during any pick up in demand. The fracking story is also not the same as in the past. While record wells are being dug, there are issues with infrastructure to start pulling oil. Completion and Production revenues from Halliburton's recent earnings release shows the profitability of renting equipment that is in short supply.
In short the outlook for the macro space is not favoring a surge in oil prices in the near future, but oil service companies keeping growth reigned in through less Cap Ex will be able to weather a slowdown easier than in the past and provide a great entry point for a longer term outlook.