Schlumberger Well Construction and Reservoir Performance Lead Earnings With Higher Oil and Gas Price Rises

The world’s largest oil fields service company Schlumberger reported better than expected earnings Friday. Higher demand for its services and equipment, as producers capitalize on a rebound in crude and natural gas prices. Growth was driven by its core divisions: Well Construction and Reservoir Performance. SLB also announced a 40% increase in its quarterly cash dividend, from $0.125 per share to $0.175 per share.

Schlumberger Vintage

Schlumberger Ltd NYSE: SLB Reported Before Open Friday

$0.39 EPS Beat $0.36 EPS AND $5.8 Bil Missed $5.9 Billion as Forecast in Revenue 

Earnings 

Schlumberger Limited (NYSE: SLB) reported for the March quarter adjusted earnings of 34 cents a share, slightly higher than the consensus estimate of 33 cents, according to a survey of analysts tracked by FactSet. Revenue of $5.96 billion was more than the $5.91 billion analysts had expected.

Global oil and natural gas prices have climbed substantially since the start of 2021 to over $120 a barrel and $8.00 Btu HH on the back of a vaccine-fueled demand recovery and the Russian invasion of the Ukraine.

Growth was driven by its core divisions:

Well Construction and Reservoir Performance.

  • The Well Construction segment, which delivered a 24% year-over-year revenue increase, provides products to optimize well placement.
  • Reservoir Performance consists of services that improve reservoir productivity and generated 21% more in revenue in the quarter. Both segments exceeded consensus.

Well Construction and Reservoir Performance. Our core service divisions had very strong momentum to start the year. In addition, we secured several new multi-year contracts and improving commercial condition in the number of geographies and services. Digital & Integration also posted double-digit growth compared to the same period last year with new critical commercial contracts and significant advance of our digital platform strategy with the launch of our first innovation factory in North America. In Production System, our core equipment division year-on-year growth was muted by the impact of supply chain bottlenecks, which have pushed deliveries into subsequent quarters. Despite these transitory challenges, I’m very pleased with the quality and size of the backlog and orders secured in the past 12 months. Olivier Le Peuch — Chief Executive Officer

Raised Dividend

Schlumberger also announced a 40% increase in its quarterly cash dividend, from $0.125 per share to $0.175 per share signaling a positive outlook for earnings/cash flow trajectory.

Outlook

SLB noted the uncertainty linked to Russia but maintained its outlook for full-year revenue growth in the midteens. Analysts expect $25.98 billion in revenue for the full year 2022, which translates to 13.3% growth compared with last year.

JP Morgan Take

J.P. Morgan analyst Christyan Malek argued Schlumberger could be one of the biggest beneficiaries of increased spending on oil production given its international market exposure.

“We believe lost Russian barrels will need to be compensated for by investing in increased productive capacity elsewhere internationally,” he said in a note. “Schlumberger’s revenue mix now ~80% international …and [it has] a portfolio geared to the types of long-cycle projects we think are likely going to be required to satisfy global oil demand,” he added. Malek, who has Schlumberger on the firm’s best ideas list, has an Overweight rating and $43 price target on the stock.

Source: SLB, AlphaStreet

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