Current SLB Stock Info

But expect rising service costs and stricter return hurdles
Paal Kibsgaard, CEO of the world’s largest oilfield service provider Schlumberger (ticker: SLB), gave his assessment of the global oil and oil services markets during the company’s third quarter conference call.

“The business environment stabilized as expected in the third quarter, confirming that we have indeed reached the bottom the cycle. The current period of oversupply and inventory build is over and market sentiments should soon change, paving the way for an increase in oil ...

Analyst Commentary

From Wolfe Research:
Still early in E&P budget planning to make a call on 2017 capital spending, but SLB does not expect a broad-based V-shaped recovery that some of their peers are prophesizing, although SLB does “see upside in 2017 in North America land, the Middle East and Russia markets.” Global oil markets seem to be “more or less balanced,” as global inventories are flattening, with the US actually showing consistent draws. OPEC cuts will only act to accelerate the inventory drawdowns. The bigger question for us – does OPEC’s strategy change again once global inventories are back to a normal level?

From Stephens:
Consistent with industry commentary, visibility into 2017 CapEx budgets remains murky, especially as producers worldwide eye growing OPEC production levels heading into its late-Nov. meeting. But SLB is fairly confident we have found a cyclical bottom in most geo-markets and anticipates 2017 non-OPEC production could be flat at best, moving towards a global supply/demand equilibrium. And although a "V-shape" recovery isn't likely in SLB's view (nor our view), the Co. sees a few select pockets of activity strength in 2017 (i.e. full-year growth vs. 2016) in NAM Land, Russia, and the Middle East. So, while questions surrounding the timing of supply/demand balancing and 2017 spending persist, it is clear SLB is ahead of the curve on focusing its efforts on 1) developing leading-edge technologies, 2) offering integrated products/services packages, and 3) maintaining its broad geographic footprints.
Key Takeaways:
As CAM operations remain challenged due to declining backlog and decreased demand in longer-cycle offshore equipment manufacturing, SLB's modest 2017 outlook is founded on expectations for NAM Land, Russia, and Middle East markets exhibiting y/y activity growth, as the recovery pace in most other geo-markets remains subdued (or non-existent). SLB sees a path to profitability in NAM Land in drilling due to the increase in technology uptake as operators target even longer well laterals. Thus, SLB is willing to pursue market share gains in drilling but not yet in the NAM frac market as it remains dilutive. SLB is rolling out 2 "pilot" land rigs in 4Q16 in the U.S., which is on schedule, and SLB maintains plans to roll out a number of these rigs in 2017. SLB expects LAM, Europe/Africa to improve next year, though from current trough-like levels, expectations for Asia remain weak.  

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