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Schlumberger (SLB) Q2 Earnings Meet Estimates, Revenues Top

Nilanjan Banerjee

Schlumberger Limited’s SLB second-quarter 2019 earnings of 35 cents per share (excluding charges and credits) were in line with the Zacks Consensus Estimate. The bottom line, however, declined from 43 cents a year ago.

The oilfield service giant recorded total revenues of $8,269 million, almost the same as the year-ago quarter figure. The top line beat the Zacks Consensus Estimate of $8,115 million.

Contributions from drilling operations in the international markets aided the quarterly results. Higher wireline and testing services in Russia and Central Asia as well as the United Kingdom and Continental Europe were also the positive factors. These were partially offset by soft prices of hydraulic fracturing.

Schlumberger is the first major company in the oilfield service space to release Q2 numbers. Two other key oilfield service firms, Halliburton Co. HAL and Baker Hughes, a GE company BHGE, are scheduled to report results on Jul 22 and Jul 31, respectively.

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Segmental Performance

Reservoir Characterization and Drilling segments saw a year-over-year increase in revenues while the Production and Cameron units reported a decline.

Increased Wireline and Testing activities in Russia & Central Asia, United Kingdom & Continental Europe and Saudi Arabia & Bahrain, which were backed by rising exploration operations in offshore plays, aided the Reservoir Characterization segment.

Significant contributions from profitable international business boosted the company’s Drilling unit. This was partially negated by a drop in activities in North American shale plays.

Soft prices for hydraulic fracturing hurt the Production segment. The results were partly made up for by higher activities associated to Well Services in the international market.

Revenues at the Reservoir Characterization unit totaled $1,649 million, marginally higher year over year. Pre-tax operating income, however, declined 7% to $326 million from $350 million in second-quarter 2018.

Revenues at the Drilling unit rose 8% year over year to $2,421 million. Pre-tax operating income was $300 million, up 4% year over year.

Revenues at the Production segment declined 5% from the year-earlier quarter to $3,077 million. Moreover, pre-tax operating income fell 26% year over year to $235 million.

Revenues at the Cameron segment amounted to $1,237 million, down 4% year over year. Pre-tax operating income dropped 6% from the prior-year quarter to $156 million.

Financials

As of Jun 30, 2019, the company had approximately $2,348 million in cash and short-term investments plus $16,978 million in long-term debt. This represents a debt-to-capitalization ratio of 32%. Through the June quarter, 2.5 million stocks were repurchased by the oilfield services player.

Outlook

With the increase in count for drilling rigs in international resources, Schlumberger reaffirmed its projection at 7 to 8% higher international spending by upstream energy firms. However, explorers are facing constant investor pressure for higher returns instead of production growth. The headwinds are likely to lower investments by explorers and producers in the land market of North America by 10% through 2019, reaffirmed the world’s largest oilfield service firm.

Zacks Rank & Stock to Consider

Schlumberger currently carries a Zacks Rank #3 (Hold). Meanwhile, a better-ranked player in the energy space is Oceaneering International, Inc. OII with a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Oceaneering International has beaten the Zacks Consensus Estimate for its bottom line in the past four quarters.

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Halliburton Company (HAL) : Free Stock Analysis Report
 
Oceaneering International, Inc. (OII) : Free Stock Analysis Report
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Baker Hughes, a GE company (BHGE) : Free Stock Analysis Report
 
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