Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Schlumberger Q3 Earnings: Oil Surge Fuels Growth, Pushes Stock 30% Higher 

Published 2021-10-21, 12:56 a/m
Updated 2020-09-02, 02:05 a/m
  • Reports Q3 2021 results on Friday, Oct. 22, before the open
  • Revenue Expectation: $5.94 billion
  • EPS Expectation: $0.36

Oilfield giant Schlumberger (NYSE:SLB) is in a sweet spot these days. The stock has soared as demand for the company's services returned after crude oil’s historic price collapse last year.

Schlumberger Weekly Chart.

In a clear sign that the worst is behind them, investors have sent Houston-based Schlumberger stock surging about 30% in the past three months. This rally is backed by powerful demand for energy products after the pandemic shock that forced Schlumberger to drastically restructure its business.

Schlumberger operates in more than 120 countries, supplying the industry's most comprehensive range of products and services, from exploration through production. Its quarterly results serve as a bellwether for the energy business given its reach across regions and insight into drillers’ plans.

According to Schlumberger’s latest guidance, the company sees an “exceptional growth cycle” in the next few years. Oil prices rose to above $80 per barrel this month and natural gas to a record high as the energy crisis in Europe and China ripples across the globe, raising the spectre of shortages in several countries.

Another positive for investors is that Schlumberger has much leaner operations after a massive overhaul of its business during the pandemic. In the past two years, it has cut tens of thousands of workers, reshuffled the company’s business around the globe and sold off assets in North America in order to focus on overseas work. The service provider expects to generate about 80% of sales from international markets.

Strong Earnings Growth

In a recent note JPMorgan said that an increase in international production levels should benefit Schlumberger:

“Our upgrade reflects the company’s advantaged portfolio that is poised to deliver strong earnings growth from the global recovery in upstream spending and further margin expansion. Our favorable thesis is predicated on our view that U.S. [exploration and production] capex restraint will lead to less U.S. shale growth, but higher levels of international activity to support the increase in productive capacity.”

Despite this optimism and much improved market conditions, there are still many obstacles that could impede growth for oil services giants. The big question mark is how keen the world’s largest oil producers are to ramp up production. So far, it seems oil companies are answering to investors, who want them to return more cash, abandon projects and pay off debts.

Exxon Mobil Corp.’s (NYSE:XOM) board of directors is debating whether to continue with several major oil and gas projects as the company reconsiders its investment strategy in a fast-changing energy landscape, the Wall Street Journal reported yesterday.

Global supply shortages and inflation can also eat into margins. Baker Hughes (NYSE:BKR) reported this week its oil services unit was hurt by supply-chain snarls and cost inflation in its chemicals business.

Bottom Line

Due to its vast international business, Schlumberger is in a good position to reap the benefits of a strong rebound in energy markets. Its share price, however, is already reflecting that optimism and tomorrow’s possible earnings beat may not fuel further gains.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.