by Aaron Levitt | January 16, 2014 5:45 am
As we’ve mentioned before, it takes a lot of technical know-how in order to pull oil and natural gas from today’s unconventional wells. And perhaps no one does it better than global oil stock Schlumberger (SLB). With operations across the world — and the bulk of its revenue coming from abroad — SLB is the perfect way to gauge overall drilling activity across the world.
Which is why upcoming earnings for SLB stock are important for all oil stock investors.
Schlumberger stock reports its fourth quarter and year-end earnings results this upcoming Friday, so investors will be waiting to see how the new year is shaping up. Here’s what to expect.
Despite gaining more than 19.7% over the last 12 months, SLB stock might have even more growth left. That’s because the world’s largest oil service stock should continue its recent string of rising earnings.
Overall, Schlumberger is expected to produce earnings of $1.33 per share for the fourth quarter of 2013. That average earnings estimate — as reported by Thomson Reuters — is a 23% jump versus the same period a year ago and the second straight quarter of 20% or greater EPS gains. This is the first time since March of 2012 that Schlumberger stock has managed to post that kind of growth. Additionally, revenues are expected to rise 7% to reach $12 billion for the quarter.
This feat of recurring rising earnings and revenues has been driven by the continued demand for SLB’s expertise in both onshore and deepwater drilling. Internationally, SLB stock is expected to see greater demand for its oil field services in North Africa, Australia and Europe. These efforts will marginally add to Schlumberger’s earnings, as will lower raw material costs and increasing efficiencies.
However, the real winner for SLB stock could be rising activity in North America.
Reversing a roughly yearlong trend, drilling activity in the U.S. and Canada has resumed with a vengeance. North American counts are up by roughly 5%, and SLB is estimated to have capitalized on the opportunity. In the quarter, SLB unveiled some new fracking technology that uses less water and proppant.
Analysts estimate that this new “hiway” fracking technology has allowed Schlumberger to gain market share in the pressure pumping arena from smaller rivals like C&J Energy Services (CJES).
Additionally, SLB should show some quality results from its offshore offerings in the Gulf of Mexico. Like onshore, deepwater rig counts in the Gulf have surged and now sit at 58. And since rival Halliburton’s (HAL) snafu back in 2010, Schlumberger has been getting more drilling contracts from E&P firms.
Additionally, its subsea partnership with Cameron (CAM) has really begun to pay benefits and drive efficiencies. Building on the back of partnerships success in the third quarter, analysts estimate that SLB should see margins rise at its North American division when it announces earnings on Friday.
With another quarter of stellar earnings ahead, the future looks bright for SLB stock and its shareholders. Guidance from the firm should be swift as the global economy finally begins to shift into high gear. That should be great news for energy demand and, ultimately, oilfield services from SLB.
With catalysts such as continued rising drilling activity in North America, the possibility of tapping Mexico’s bounty and additional demand coming from international markets, Schlumberger is in a great position to capture these opportunities.
For investors, SLB’s upcoming earnings report will highlight just how good Schlumberger is. For those looking for a top notch oil stock, SLB is where it’s at.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned security.
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