Schlumberger, Ltd. (NYSE: SLB – $75.84), the world’s largest oil services provider, posted a large fourth quarter loss on one-time charges of $2.7 billion, but beat Wall Street forecasts and offered an upbeat outlook for its international operations. The non-recurring items included a $938 billion write-down of its holdings in Venezuela due to economic turmoil there and more than $1.1 billion in restructuring expenses for its WesternGeco seismic business. Schlumberger said it would remain in Venezuela despite the write-offs for unpaid bills and continue to seek payment for past work there. Worldwide revenue rose 15% to $8.18 billion for the quarter and, excluding the write-downs, profit benefited from the year’s recovery in crude prices, rising to $0.48 a share, above the average analyst estimate of $0.44.
The company was encouraging about its prospects for international growth this year, supported by recent contract wins including those in Saudi Arabia, Kuwait and India and believes these markets will return to growth for the first time since 2014, supported by a nearly 24% climb in the global Brent futures contract in the past three months. In North America, where fourth quarter revenue rose 59% over a year earlier, Schlumberger said it expected to deploy new hydraulic fracturing fleets amid strong demand for pressure pumping services. The company in January acquired Weatherford International’s hydraulic fracturing business, scrapping plans for a joint venture. The recovery of global oil prices to almost $70 a barrel has provided impetus to shale drilling in North America, positioning the United States to push oil output past 10 million barrels per day – toppling a record set in 1970.
Earnings for 2018 could approach $2.21 per share vs. the actual adjusted final figure for this year of $1.50. These good-quality shares offer attractive 3- to 5-year total return potential, pending a fuller oil market recovery.