Categories Analysis, Energy

Schlumberger (SLB) enters 2023 on an upbeat note. What’s in store?

Broad-based growth across all four operating segments pushed up revenues by 27% in the fourth quarter

The demand for oil field services recovered strongly last year and is expected to stay strong as the post-COVID reopening continues. Schlumberger Limited (NYSE: SLB), a leading provider of offshore-drilling services globally, last week reported strong results for the fourth quarter, riding the favorable market conditions and increased spending in capacity expansion.

The Stock

Shares of the company have been rising steadily after falling to a multi-year low around three years ago when operations were disrupted due to COVID-19. Currently trading well above its long-term average, the stock looks set to stay on an upward spiral this year, creating significant shareholder value.

Schlumberger Limited Q4 2022 Earnings Call Transcript

Rarely did the stock look so interesting in the past as it is now, thanks to the low price and the company’s impressive financials. As per estimates, SLB should gain more than 16% by year-end. The reasonable valuation, when compared to the growing earnings, adds to the stock’s appeal. The strong cash flow should give the company fuel to continue returning capital to shareholders in the form of share buybacks and dividends.

Schlumberger Q4 2022 earnings infographic

Road Ahead

The company’s recent expansion in Russia, by signing new service-and-equipment contracts after rival energy firms discontinued operations in that region, will contribute to revenues going forward. While demand conditions look encouraging, fluctuations in oil prices and rising costs could be a barrier to achieving high growth in the near future. The other challenges are lingering supply chain issues and geopolitical tensions.

Markets are poised for strong growth in the Middle East and Latin America geographically and more broadly in offshore and in gas. In the Middle East, we expect record levels of upstream investments, with a ramp-up in various capacity expansion projects designed to deliver more gas production and a combined oil increment of 4 million barrels per day through 2030. Offshore activity will continue to strengthen as tieback and new development projects mobilize and new FID are sanctioned, while Russian activity is expected to contract,” commented Schlumberger’s CEO Olivier Peuch.

Q4 Results Beat

Over the last decade, Schlumberger has constantly impressed its stakeholders by reporting strong quarterly earnings that mostly exceeded, or matched, analysts’ forecasts. The fourth quarter was no exception, with adjusted net income surging 73% to $0.71 per share. The stronger-than-expected earnings performance reflects broad-based growth across all four operating segments, which resulted in a 27% increase in revenues to $7.9 billion. The top line also came in above the consensus forecast.

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The stock declined despite Schlumberger reporting strong Q4 numbers and issuing a bullish business outlook, and the weakness continued this week. SLB traded down 1% on Tuesday afternoon.

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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