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Earnings Preview: What to expect from Schlumberger’s Q3 results

Brent crude prices are hovering around $80 per barrel. In early October, it eclipsed $86 mark, recording a four-year high for the crude oil. With rising crude oil prices, Schlumberger (SLB) is scheduled to report its Q3 results before the market opens on October 19. The oilfield services industry is starting the earnings season with Schlumberger.

For the third quarter, analysts expect Schlumberger’s earnings to come in at $0.46 per share on revenue of $8.59 billion. Street is forecasting an improvement of 8.7% for revenues and 9.5% for earnings per share compared to prior year period.

All eyes will be on the North American region’s performance, which is going to be a key deciding factor for the business. Last quarter, the region brought in $3.13 billion, which is a 43% jump over the prior year, driven by increased spending on production by oil firms due to rising crude oil prices.

For the week ended October 12, drilling rig count in the US jumped 15% to 1,063 rigs over the prior year, which is going to increase the needs for oilfield services. This is good news for Schlumberger and its peers. However, there are headwinds looming for the sector, which remains a concern for shareholders.

Oil producing firms are slowing down on well completions due to lack of pipeline connectivity to transport oil from the wells, which is likely to start only next year. Another factor to take into account is the possibility of reduced spending from oil producers as their budgets could be strained, forcing them to go slow on well development. This could result in reduced demand for oilfield services putting pressure on pricing for Schlumberger and its rivals.

North America upswing lifts Schlumberger’s Q2 profit

On the flip side, with rising oil prices the offshore segment is witnessing to see some action. The company expects more demand for its services as offshore drilling activity increases, which would improve the earnings. Any slump on the onshore side from the North American region could be offset by the pickup in the offshore front.

Apart from these factors, brewing trade wars, oil sanctions on Iran and weakness on the frac market back home could also decide how things are going to shape up for the industry in the near future.

 

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