Schlumberger Reaffirmed at Neutral - Analyst Blog
15 Agosto 2013 - 8:00PM
Zacks
We reaffirmed our Neutral recommendation on leading oilfield
services company, Schlumberger Limited (SLB), on
Aug 7, 2013. The company sailed past estimates in the second
quarter aided by international exposure, its focus on execution and
integration capabilities. The company holds a Zacks Rank #2, which
is equivalent to a short-term Buy rating.
Why Maintained?
We believe Schlumberger's combination of a strong balance sheet,
technological leadership and efficient management will be
beneficial in the long term. We also believe that the company is
favorably positioned to benefit from current trends in oilfield
services, given improving activity levels and greater need for
stimulation and completion of services in North America. Although
operating margin slipped for the region during the second quarter
on a year-over-year basis, the pace of deterioration is expected to
slow down in the upcoming quarters led by seasonally strong
multi-client sales. While hydraulic fracturing pricing and land
drilling activity remain depressed throughout North America, this
was more than offset by strength in the Gulf of Mexico (GoM).
In the international arena, the company experienced a strong second
quarter and we expect activity levels to increase and enjoy healthy
growth throughout 2013. Schlumberger expects its international
spending on exploration and production to climb 10% this year. The
company is aiming for continued margin improvement underpinned by
the Middle East/Asia and Europe/CIS/ Africa regions. Russia and
Australia, in particular, are expected to be sources of strength in
the coming quarters.
Schlumberger’s overall outlook for 2013 remains largely unchanged
from its earlier projections. The company remains unperturbed
despite the main economies including China, the U.S. and the Euro
zone witnessing mixed fortunes in the second quarter. As a result,
both oil and gas prices also are following a sideways trend in
pricing, reflecting the mixed nature of the global economy.
Looking forward, Schlumberger’s optimism on rising rig count and
customer activity will likely lead to its increased international
spending on exploration, higher production and stepped up activity
in the U.S. GoM. The company also expects steady growth in key
regions that include Sub-Sahara Africa, Russia, the Middle East,
China and Australia.
Schlumberger generates about two-thirds of its revenues
internationally, marking the highest ratio among the biggest
oilfield service providers, which include Halliburton
Company (HAL) and Baker Hughes Inc.
(BHI). Schlumberger’s strength also lies in effective
implementation, strong contracts and new technologies.
The oilfield services behemoth believes that strong leverage to the
deepwater segment will help it to perform well over the coming
years. While the company makes most of its money outside North
America, it bears the brunt of industry-wide weakness in U.S.
hydraulic fracturing services as well as softness in the land
coiled-tubing business.
Other Stocks to Consider
There are other stocks in the sector that appear more rewarding.
These include Pembina Pipeline Corporation (PBA),
which is expected to perform impressively over the next few months
and carries a Zacks Rank #1 (Strong Buy).
BAKER-HUGHES (BHI): Free Stock Analysis Report
HALLIBURTON CO (HAL): Free Stock Analysis Report
PEMBINA PIPELN (PBA): Free Stock Analysis Report
SCHLUMBERGER LT (SLB): Free Stock Analysis Report
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