Yesterday Schlumberger said its 2008 profit would fall below expectations. The slowdown in economic activity is being felt in the oil field services and machinery companies that support drilling activity, as they dial down activity in response to weakening demand for energy, and a dramatically reduced revenue forecast for 2009. Natural gas is in oversupply in North America, so the next 8 weeks of weather related draw downs will have a big impact on drilling plans in North America for Q1 2009. International drilling projects seem to be holding up for now, as they are harder to defer or delay because of long term contracts in place.

Look for serious cuts in Oil & Gas company 2009 Capital spending plans this month into early January. 15 to 40% are the range of cuts I expect to see. This may further depress the oil field service company order backlog, generating further operating budget cuts in Q1.     

Does this view match your own? Please comment.