Schlumberger Q2 EPS Beats, Sales Meet Views; Cuts Additional Jobs
Oilfield services provider Schlumberger N.V (NYSE: SLB – $81.61) reported second quarter results that declined year-over-year, but was able to beat consensus forecasts on earnings and met on revenues. The company also said it reduced its workforce by another 8,000 in Q2, bringing its total reductions to 16,000 for the year. Chairman and CEO Paal Kibsgaard said that market conditions “worsened further in most parts of our global operations” in the latest period, but “in spite of the continuing headwinds we now appear to have reached the bottom of the cycle.” Schlumberger further streamlined its overhead, infrastructure and asset base in the second quarter which led to a $1.9 billion non-cash impairment charge for fixed assets, inventory and multi-client seismic data. The company said it will also book $646 million in restructuring charges in Q2 for the workforce reduction. For the quarter, SLB reported adjusted earnings of $0.23 per share, compared with the prior-year period’s $0.88 and two cents ahead of Street views. Revenue was $7.2 billion, down 20% from $9 billion in the same quarter last year and compared to the consensus estimate for revenue of $7.1 billion.
Wall Street is nevertheless looking past the hard times. The bounce in oil prices since the beginning of 2016 has helped Schlumberger’s stock price come off its February lows. Relative to its peers in the energy services space, France’s SLB has the strongest exposure to the Eastern Hemisphere, which is viewed as a positive, although friction in Russia and Iraq could provide some localized headwinds. Over the remainder of 2016, I don’t expect shares to rally much unless oil prices suddenly rebound. Over the longer-term, however, the shares’ recovery potential to 2019-2021 is attractive, and may especially suit conservative investors given the stock’s solid finances, relatively strong cash flows and a dividend yield of 2.5%.