Oilfield services provider Schlumberger, Ltd. (NYSE: SLB – $64.93) said revenue fell 39% to $7.74 billion and the prolonged energy slump continued to pressure pricing and demand for its services from oil producers. But the company was able to post fourth quarter adjusted earnings of $0.65 a share, beating Wall Street forecasts by 2 cents, but well below the $1.50 earned in the same period last year. Schlumberger also said it was launching a new share-repurchase program of $10 billion to replace the program for the same amount that began in 2013 and is nearing completion. Shares of SLB have fallen 25% in the past 12 months. There’s no secret that things look bleak for the company as customers continue to cut spending on drilling and exploration with excess capacity of oil on the market. In anticipation of an extended activity weakness in the first half of 2016, Schlumberger implemented another significant adjustment to its cost and resource base during the fourth quarter. This included a further workforce reduction of 10,000 employees, as well as greater streamlining of overhead, infrastructure and asset base. Oil prices notched their biggest gains in nearly three months on Thursday after official data showed crude stockpiles grew less than expected. The U.S. Energy Information Administration said crude-oil inventories grew by four million barrels last week, less that the 4.6-million-barrel increase the industry group American Petroleum Institute had predicted.
Holding shares of Schlumberger won’t pay off anytime soon if oil prices remain at current levels, but further down the road, sales can get back to more normal levels with profits to follow. For patient conservative investors willing to wait and participate in an eventual recovery of energy prices, the good quality shares can continue to be held.