Oilfield services company Schlumberger Ltd. (SLB, Financial) reported lackluster second-quarter financial results before the opening bell on Friday, sending shares lower after an initial pop in premarket trading.
The Houston-based company, which is the world’s largest provider of reservoir characterization, drilling, production and processing services to the energy industry, posted earnings of 35 cents per share, which were in line with FactSet’s estimates. While revenue grew 5% sequentially to $8.27 billion, it was down from $8.3 billion in the prior-year quarter. Regardless, the company still managed to top analysts’ expectations of $8.11 billion.
By region, the North American business recorded 2% sequential revenue growth to $2.8 billion an 11% year-over-year decline. International revenue of $5.5 billion grew 8% sequentially and year-over-year. In addition, Schlumberger said net income increased 14% from the year-ago quarter as strong international demand offset declines in North America.
In a statement, Chairman and CEO Paal Kibsgaard said the results “reflect the normalization in global E&P spend that we were anticipating as international investment increases in response to the accelerating decline in the mature production base, and North America land investment decreases due to E&P operator cash flow constraints.”
He also commented on the outlook for the overall oil market, which has faced some volatility from the U.S.-China trade war as well as headwinds from OPEC’s production cuts, saying he expects near-term sentiments to “remain balanced” even though the oil demand forecast for 2019 has been “reduced slightly.”
“On the supply side, we continue to see U.S. shale oil as the only near- to medium-term source of global production growth, albeit at a slowing growth rate, as E&P operators continue to transition from an emphasis on growth to a focus on cash and returns, with consequent restraining effects on investment levels,” Kibsgaard said. “These effects, combined with the decision by OPEC and Russia to extend production cuts through the first quarter of 2020, are likely to keep oil prices range bound around present levels.”
Schlumberger also announced that as of Aug. 1, it will have a new CEO as its current leader is retiring. Kibsgaard, who has led the company for the past eight years and has been with it for more than 22 years, will be succeeded by Chief Operating Officer Olivier Le Peuch. He will also step down as chairman of the board, being replaced by Mark G. Papa, who is currently a non-independent director.
With a market cap of $53.72 billion, Schlumberger was trading 1.65% lower on Friday morning at $38.14. After tumbling 46% in 2018, GuruFocus estimates the stock has gained 6% year to date.
According to GuruFocus’ Industry Overview page, other top players in the oilfield services sector are Baker Hughes, a GE Co. (BHGE, Financial), Halliburton Co. (HAL, Financial), National Oilwell Varco Inc. (NOV, Financial) and Core Laboratories NV (CLB, Financial).
Gurus who currently see value in Schlumberger include Dodge & Cox, First Eagle Investment (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Ken Fisher (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Charles de Vaulx (Trades, Portfolio) and Steven Cohen (Trades, Portfolio), among others.
Disclosure: No positions.
Read more here:
- Dodson's Parnassus Endeavor Fund Picks Up 2 Stocks in 2nd Quarter
- The Top 5 Buys of the T Rowe Price Equity Income Fund
- Yacktman Focused Fund Buys 3 Stocks in 2nd Quarter
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
