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Demand for oilfield services recovered strongly last year and is expected to remain strong as it reopens after COVID. Schlumberger Limited (NYSE: SLB ), the world’s leading provider of offshore drilling services, last week reported strong results for the fourth quarter, riding on favorable market conditions and increased capacity expansion spending.
Savings
The company’s stock has continued to rise after a multi-year decline about three years ago when operations were disrupted due to COVID-19. Currently trading above its long-term average, the stock looks set to remain on the rise this year, creating significant shareholder value.
Schlumberger Limited Q4 2022 Earnings Call Transcript
It’s rare for a stock to look as attractive as it does today, given its low price and excellent company financials. According to estimates, SLB should gain more than 16% by the end of the year. Reasonable value, when compared to growing earnings, adds to the attractiveness of the stock. Strong cash flow should fuel the company’s continued return of capital to shareholders in the form of share buybacks and dividends.
Front Street
The company’s recent expansion in Russia, with the signing of a new service-and-equipment contract after rival energy companies stopped operating in the region, will contribute to profits going forward. While the demand situation looks encouraging, fluctuations in oil prices and rising costs could be a hindrance to achieving high growth in the future. Other challenges are supply chain issues and geopolitical tensions.
“The market is poised to grow strongly in the Middle East and Latin America geographically and increasingly in offshore and gas. In the Middle East, we expect record levels of upstream investment, with a ramp-up in various capacity expansion projects designed to generate more gas production and a combined additional 4 million barrels of oil per day through 2030. Offshore activity will continue to strengthen as a tieback and mobilize new development projects and sanctioned new FIDs, while Russian activities are expected to contract,” Commented Schlumberger CEO Olivier Peuch.
Q4 Beat results
Over the last decade, Schlumberger has consistently impressed stakeholders by reporting strong quarterly earnings that typically exceed, or match, analyst forecasts. The fourth quarter was no exception, with adjusted net income rising 73% to $0.71 per share. The stronger-than-expected earnings performance reflected broad-based growth in all four operating segments, which drove profits up 27% to $7.9 billion. The top line also came in above the consensus forecast.
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Stocks declined despite Schlumberger reporting strong Q4 numbers and issuing a bullish business outlook, and weakness continued this week. SLB traded down 1% on Tuesday afternoon.
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