Oil Field Services Giant SLB Reports Weaker Cashflow & Plateauing North American Activity

The world’s largest oil fields service company SLB (formerly known as Schlumberger) reported better than expected first quarter earnings Friday before the market opened. However, $SLB stock was down 4% after the release with concerns about reported weaker-than-expected cash flow and activity in the North American onshore market may plateau this year. Earnings per share were 63 cents, compared with an average estimate of 60 cents among analysts surveyed by FactSet. Revenue was $7.74 billion, compared with expectations for $7.44 billion.

The oil service giant’s peers Baker Hughes (BKR) reported earlier in the week and Halliburton (HAL) reports next week.

Schlumberger Vintage

Schlumberger Ltd NYSE: SLB Reported Before Open Friday

Schlumberger Q1 23 Earnings

Q1 2023 earnings release at 6:15 a.m. ET; conference call at 8:30 a.m ET

  • Net income attributable to SLB was $934 million, up 83% YoY, while EPS was $0.65, up 81% YoY. Adjusted EPS rose 85% to $0.63 from last year.
  • Adj EPS $0.63 (est $0.60)
  • Rev $7.74B (est $7.45B , which was up 30% year-over-year.
  • Q1 Adj. EBITDA $1.79B (est $1.74B)
  • Q1 Well Construction Rev $3.26B (est $3.07B)
  • Capex $410M (est $489M)
  • FCF Generation Is Expected To Accelerate Throughout Year
  • Board of Directors approved a quarterly cash dividend of $0.25 per share of outstanding common stock, payable on July 13, 2023, to stockholders of record on June 7, 2023.
  • During the quarter, SLB repurchased approximately 4.4 million shares of its common stock at an average price of $52.65 per share for a total purchase price of $230 million.

Earnings Insight:

  • Schlumberger has posted better than expected EPS figures in 10 straight quarters, missing revenue expectations only twice in that period.
  • SLB stock has a price-to-earnings ratio (P/E) of 20.50
  • SLB dividend yield is 1.92%.
  • SLB price-to-book-value (P/BV) is 4.001

SLB: Stock Market Reaction

  • $49.60 ▼ -2.37 (-4.55%) today
  • $49.60USD▲ +8.88 (+21.85%) past year
  • $49.60 ▼ -19.54 (-28.29%) past 5 years
  • 52wk High $59.45
  • 52wk Low $30.65

Outlook

“The global activity outlook for the full year remains very solid,”

“Through the first quarter, the resilience, breadth, and durability of this upcycle have become more evident, particularly in the international markets.”

“Looking ahead to the second quarter, we expect strong growth with seasonal recovery in the Northern Hemisphere, capacity expansion projects in the Middle East that are in various stages of ramp-up, and robust activity in Asia and Sub-Sahara Africa. This growth scenario provides support for broad sequential margin expansion across the Divisions and geographies.

CEO Olivier Le Peuch said in a statement.

SLB Conference Call:

“The international and offshore markets continue to experience a strong resurgence of activity driven by resilient long-cycle development and capacity expansion projects.”

“Positive long-term demand outlook for oil and gas and the potential for a stronger demand rebound in the second half of the year. In addition, recent OPEC+ decisions continue to keep commodity prices at supportive levels.”

Replying to the question “Have you seen any indication of Middle East slowdown?

No. Have not seen it. Don’t believe will see it. Note this growth is not just Saudi & UAE. This is across the GCC and it’s also natural gas. Was just in the Middle East.

Revenue by Geographical Area

International

Latin America Revenue

  • $1.6 billion increased 34% year on year due to robust drilling activity and improved pricing, higher sales of offshore production systems in Brazil and Guyana, and increased stimulation work in Argentina. Sequentially, revenue was essentially flat as higher drilling activity was offset by reduced APS revenue in Ecuador due to production interruptions.

Europe/CIS/Africa Revenue

  • Revenue of $2.0 billion grew 41% year on year primarily from higher sales of production systems in Europe and Scandinavia and increased exploration and production activity offshore Africa.
  • Sequentially, revenue decreased 5% primarily driven by Russia. Excluding Russia, revenue grew 2% sequentially due to higher drilling activity from new projects in Angola, Gabon, and Namibia and increased sales of production systems in Europe.

Middle East & Asia Revenue

  • Revenue of $2.4 billion increased 18% year on year due to higher drilling, intervention, and evaluation activity in Saudi Arabia, United Arab Emirates, Qatar, and Oman and across Southeast Asia and Australia.
  • Sequentially, revenue decreased 5% due to seasonally lower activity in Asia, weather-impacted stimulation activity in Saudi Arabia, and reduced sales of production systems across the area following the strong year-end sales in the previous quarter.

North America

  • Revenue of $1.7 billion grew 32% year on year due to strong land and offshore drilling and higher sales of production systems.
  • US land revenue increased, driven by Well Construction revenue growth that outperformed the rig count growth, in addition to higher Production Systems revenue.
  • North America offshore revenue grew due to increases in drilling activity, exploration data licensing sales, and sales of subsea production systems in the US Gulf of Mexico.
  • Sequentially, North America revenue increased 4% due to higher land and offshore drilling and increased sales of subsea production systems, which were partially offset by lower APS revenue in Canada.
  • Revenue from both Well Construction and Production Systems grew 9% sequentially.

Oil Prices

SLB Peer’s Earnings

About Schlumberger

SLB (formerly Schlumberger) NV is the world’s largest oil fields service company and provides technology for reservoir characterization, drilling, production and processing to the oil and gas industry. It operates through the following business segments: Digital and Integration, Reservoir Performance, Well Construction, and Production Systems. “With expertise in more than 120 countries, we collaborate to create technology that unlocks access to energy for the benefit of all.”

“Overall, 2022 was transformative for SLB as we set new safety, operational, and performance benchmarks for our customers and strengthened our market position both internationally and in North America. We launched our bold new brand identity, reinforcing our leadership position in energy technology, digital, and sustainability, and demonstrated our ability to deliver superior earnings in this early phase of a structural upcycle in energy.” SLB CEO Olivier Le Peuch commented,

Source: SLB

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