Schlumberger Posts Loss; Looks Towards Growth
Oilfield service provider Schlumberger, Ltd. (NYSE: SLB – $86.24) posted a loss, which included acquisition and restructuring charges, in its latest quarter on lower revenue, but the company said energy prices and production were both poised to increase. Along with its peers the company has been hurt by weak demand from oil and natural gas producers for services such as drilling and completing oil-and-gas wells due to a two-year decline in energy prices. During 2016, though, energy prices rose and then stabilized. Excluding the special charges, Schlumberger reported fourth-quarter per share earnings of $0.27 compared to an adjusted $0.65 a year ago, and in line with analysts’ estimates. Revenue declined 8.2% to $7.11 billion, slightly higher than Street consensus of $7.07 billion. In its production unit, its largest, revenue fell 17% to $2.18 billion. In its reservoir-characterization unit, revenue fell 23% to $1.7 billion and in its drilling unit revenue fell 32% to $2.01 billion. Geographically, all areas were negative from last year by about 4%, with the exception of the Middle East and Asia, which showed a 5% advance. For the new year, Schlumberger is budgeting $2.2 billion in capital expenditures, compared with $2.1 billion last year.
Chief Executive Paal Kibsgaard said he expects a tightening of the oil supply will balance with demand, supporting further price increases and more exploration and production investment by its customers. Mr. Kibsgaard said the company was once again pursuing growth and improving returns instead of cost-cutting and workforce reductions that it had done for nine quarters. For 2017, analysts are estimating revenue to pick up from $27.8 billion to $31.5 billion and earnings recovering to $1.90 per share from this past year’s $1.15. The shares offer appealing 3- to 5-year recovery potential and may suit conservative investors, given the company’s above average financial position.