Liberty CEO Gusek views steel tariffs as having a modest impact on oilfield services

Ron Gusek, Liberty Energy's Chief Executive Officer, said that the tariffs imposed by President Donald Trump on steel imports will have a modest impact on oilfield service providers' earnings.

Trump has imposed tariffs of 25% on steel and aluminium on March 12 and could be imposing more on April 2. Dallas Federal Reserve's survey of executives on Wednesday revealed that executives were concerned about the levies driving inflation in the oilfield and raising drilling costs.

Gusek, the new CEO of Liberty Energy after former CEO Chris Wright's confirmation as U.S. Energy secretary in February, explained that the tariffs had already pushed suppliers into raising costs for some components used in the fracking procedure, including perforating gun, which is used to create tunnels, to pump fluids, and to crack shale rock.

Gusek, in a telephone conversation, said that Liberty passes these costs onto its customers.

In a telephone interview, Gusek said: "As soon as we receive a letter stating that costs will increase, we share this letter with our clients and ask them absorb the cost."

This could also further impact the earnings of Liberty and other oilfield services providers by forcing their oil producing customers to reduce drilling activity.

Gusek explained that oil producers already have their budgets set for the year and could therefore slow down drilling to balance their costs as well casings and tubing prices rise.

According to a Dallas Fed survey, one executive said that the Trump tariffs on casing and tubes had increased costs by 25%. He warned the knock-on effect would force producers and employers to reduce employment and drop drilling rigs.

Gusek stated that he did not expect any slowdown of activity at this time, and noted that Liberty's customers have indicated a rise in costs by 2-3%.

Gusek stated that Liberty would try to offset the rising costs of industry by increasing efficiency. For example, by completing more wells quicker.

"Hopefully, we can offset this, and for our customers, the E&P sector, the end result is that we will be able to hold well costs flat even with that little bit of inflation." Reporting by Shariq KHan in New York, editing by Diane Craft

(source: Reuters)