Oilfield service companies are increasingly diversifying their operations as traditional markets face significant challenges. Declining rig counts, driven by low oil prices and heightened efficiency, have prompted major firms like Schlumberger and Halliburton to pivot towards data center services fueled by the rapid growth of artificial intelligence (AI). This strategic shift aims to capture new revenue streams beyond their conventional oilfield operations.
A report from Fortune Business Insights highlights that the demand for data centers is surging due to the widespread adoption of cloud services, offering organizations flexibility, scalability, and cost efficiency. As companies transition to cloud computing—whether private, public, or hybrid—investment in data centers is expected to escalate. This trend positions oilfield service companies to leverage their existing expertise in remote operations to meet the growing needs of the data center market.
In a recent quarterly conference call, Schlumberger reported that its Data Center Solutions segment generated $331 million in revenue for the quarter, marking a remarkable 140% increase from the same period last year. CEO Olivier Le Peuch noted that this growth is driven primarily by partnerships with hyperscale cloud providers, not oil and gas customers. “This is clearly not driven by oil and gas customers. It’s driven by our hyperscalers partners that reach out to us to help them respond to this AI boom and data center growth,” Le Peuch stated.
The company’s digital transformation strategy further underscores its commitment to integrating digital services across its offerings. Schlumberger’s Digital Solutions division, which includes areas like Platform & Applications and Digital Operations, is generating revenue at a run rate of $2.4 billion annually with a margin of 32.7%. The company anticipates this margin will rise to 35% in the near future.
Halliburton is pursuing a different strategy to penetrate the data center market. The company has formed a joint venture with VoltaGrid, a provider of gas-powered microgrids. This partnership enables Halliburton to leverage its extensive operational footprint and regional expertise while VoltaGrid contributes its engineering design and technology capabilities. CEO Jeff Miller emphasized the synergy, stating, “Through the venture, Halliburton will leverage its global operational footprint, local infrastructure, and regional regulatory expertise.”
Microgrids are becoming essential as the infrastructure to support the rapid growth of data centers struggles to keep pace with demand. Hyperscale companies like Microsoft and Amazon are expanding their data center operations to meet their internal requirements for AI storage, often facing long wait times for grid connections. The collaboration between Halliburton and VoltaGrid could address this gap by providing reliable power solutions tailored for regional data centers.
The oilfield service industry is undergoing a significant transformation. Traditional reliance on equipment rentals and technical support is giving way to a focus on digital AI infrastructure, with companies adopting subscription models to foster long-term client relationships. Early indications suggest that these ventures into digital services will enhance profitability. Schlumberger’s Digital Solutions segment, for instance, boasts an EBITDA margin of 32%, with expectations of growth to 35% in the upcoming quarter.
Both Schlumberger and Halliburton currently trade at single-digit EV/EBITDA multiples, a stark contrast to their valuations five years ago. This discrepancy indicates that investors may not yet recognize the potential revenue and profit opportunities from these new ventures, presenting a compelling entry point for potential investors.
As major oilfield service companies adapt to a shifting macro environment, the future looks promising for those willing to innovate and explore new markets. The convergence of oilfield expertise with data center infrastructure is poised to redefine the landscape of these industries in the coming years.
