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Schlumberger to post weak Q2 results as North America woes persist

Oilfield services giant Schlumberger (NYSE: SLB) will be unveiling its second-quarter financial results on Friday before the market opens. Considering the challenging pricing scenario and production issues, market watchers forecast a 19% fall in the company’s earnings. The bearish view is based on the estimate that revenues will decline by 2.3% to $8.11 billion.

The general stagnation in exploration and production activity is expected to continue in the near future as no major investments are happening in that area, despite crude prices recovering slightly from last year’s lows. The company’s top-line will particularly be impacted by productivity issues at the fertile Permian Basin.

Schlumberger (SLB) Q1 earnings drop 20% on reduced North America activity

Onshore production in North America, which accounts for about one-third of Schlumberger’s revenues, is unlikely to improve this time, despite the positive macro environment.  So, the energy firm is unlikely to give any big surprise on the revenue front, even as the volatility in crude prices continues to weigh down on oilfield services activity.

Though the challenges in North America are severe, improving pricing power will help the industry tide over the crisis in the long term. Schlumberger, with its dominant position in the segment and diversified services, is well-positioned to make a turnaround.

Earlier, the management had predicted that the oil sector will regain momentum over the remainder of 2019, and that the company’s North American operations will start benefitting from the reduction in production elsewhere, especially Russia.

Related: Schlumberger Q1 2019 Earnings Conference Call Transcript

In the first quarter, Schlumberger’s adjusted earnings fell 21% annually to $0.30 per share as the weakness in its home continent resulted in almost flat revenues. Rival oilfield service provider Halliburton (HAL), which is scheduled to release second-quarter numbers Monday morning, is expected to report a 48% fall in earnings to $0.30 per share.

Schlumberger’s shares lost consistently in recent years and plunged to a 19-year low in May this year. They dropped about 42% in the past twelve months and are maintaining the trend ahead of the earnings announcement. The stock is slightly above the levels seen at the beginning of the year.

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