If you really wanted to know what the CEO of Schlumberger said...

If you really wanted to know what the CEO of Schlumberger said this is the transcript of the Q&A from SLB Qtrly conf call.

"Thank you. Next question from Bill Herbert with Simmons & Company. Please go ahead.

Bill Herbert - Simmons & Company
I wanted to actually reference your presentation of a few weeks ago which I thought was one of the better efforts, not only from Schlumberger but just from any industry participant in some time, so first of all with regard to a question regarding business model. You've referenced this in your earnings release, you've also referenced it several times, being prepared to move to more risk-based business models. And specifically, the significant opportunity associated with the re-fracking of older wells.
So what kind of uptake are you seeing, with regard to the re-fracking opportunity? And when you describe this as a significant opportunity, can you quantify what that means, in terms of how large it is?

Paal Kibsgaard - Chairman & CEO
If you look at the work we've done so far and we posted some of the recent results in the earnings press release this quarter, a lot of the re-frack focus so far has been around being able to identify the candidates. And that's based on our understanding of the existing completions and the potential that these still hold.

And then the other part is around, how do you effectively do the refracturing while minimizing the costs. So we have, to our engineer completion and our shale formation evaluation capabilities, as well as BroadBand Sequence, now established that growth technology offering. So in terms of how many wells, I would say there are thousands of wells in North America land that are candidates for refracturing and this is both shale liquids and shale gas.

In terms of the market potential, I think you're talking billions, in terms of revenue opportunities, over an extended period of time. But this is quite a significant market opportunity. And I think the key here is that we're so confident in our ability to identify the right candidates and execute the refracturing work that we're prepared to take significant risks, in terms of how we go about doing this work. In many cases, if we can select the candidates, prepare to foot the entire bill for the refracturing work and then get paid back in production."


Read it carefully. And make your own connection to reality vis-a-vie SSN candidate wells for a no up front cost refrac.


later in the Q&A

"Kurt Hallead - RBC Capital Markets
Now the follow-up I would have is, you talk about -- you outlined a view that the U.S. recovery will not match prior activity levels in a period of pricing pressure could be upon us for a period of time. Now in the context, the re-frack -- and I'm just trying to connect the dots. Because if there's a significant amount of re-frack that's going to happen, I would have personally thought that that would lead to a more rapid capacity absorption period and potentially a faster recovery period, in terms of pricing because everyone is going to get all this backlog of re-frack.

So can you just -- I might be a little bit slow. Can you help me connect the dots on how re-fracking won't lead to an acceleration in capacity absorption? And get your thoughts on that would be great.

Paal Kibsgaard - Chairman & CEO
I think for the re-frack, this work scope, I think, is going to be limited to the companies that can do the two things that I stated earlier. Firstly, help the customers identify the right candidate. And secondly, have technologies that make the cost base of the refracturing feasible and economical. And based on the work we've done, in terms of identifying candidates during trials, re-fracks for a range of customers already, the economics, based on the BroadBand Sequence technology, is actually quite attractive in between re-fracking an old well or drilling a new well. So I think it would be limited to the companies that have that capability.

Now even if there were a range of companies that could do it, I still think that this market overall, in terms of absorbing capacity, isn't going to fix the problem. So if you look at the overall activity that we had last year, where we had about 2000 rigs operating, we're down now below 1000. If you take a pick anywhere in between the two numbers of where the recovery is going to come back, no matter what number you pick I think it's very clear that it's going to be significant over-capacity in the market.

And that means that pricing that is now already at very low levels is not going to improve in that situation. So re-frack is an opportunity for the companies that have the right technology to it. I don't think it's going to have a big enough impact to fix the overall capacity issue in North America land. But it will be, I think, a very good avenue of growth for the companies that can identify the right candidates and also have the technology to effectively re-frack, while keeping costs low enough to make it economical."