Schlumberger (SLB) Posts In-Line Q3 Earnings, Revenues Miss

Oilfield service giant Schlumberger Limited’s (NYSE:SLB) third-quarter 2017 earnings of 42 cents per share (excluding charges and credits) were in line with the Zacks Consensus Estimate. The bottom line improved from the year-earlier adjusted figure of 25 cents.

The company’s total revenue of $7,905 million improved from the year-earlier level of $7,019 million but failed to surpass the Zacks Consensus Estimate of $7,910 million.

Third-quarter earnings were driven by solid demand for directional drilling in the land market of North America. This was partially offset by major project completions in Mexico and Iraq.

Schlumberger and Baker Hughes, a GE company (NYSE:BHGE) , have reported third-quarter numbers. The other two players – Halliburton Company (NYSE:HAL) and Weatherford International plc (NYSE:WFT) – belonging to the “Big Four” oilfield service and equipment providers – will likely report results on Oct 23 and Nov 1, respectively.

Segmental Performance

Each of the groups – Reservoir Characterization, Drilling Group and Production Group – registered a year-over-year increase in revenues.

Drilling Group revenues increased primarily on contributions from the North American market. Demand for directional drilling in the continent’s land market remained strong during the quarter. However, the positives were partially negated by the closure of Mexico and Iraq’s major developments – related to integrated drilling services.

Results at the Production Group were driven by higher hydraulic fracturing work in the North American land market. Higher operations in the unconventional plays in the Middle East also led to the improvement.

The Reservoir Characterization segment was supported by strong contributions from the international market. Surge in activities related to Wireline and Testing & Process in Russia and Norway led to the improvement in results. However, reduction of sales related to multiclient seismic license hurt the business unit.

Reservoir Characterization: This group posted revenues of $1,771 million as against $1,667 million in the prior-year quarter. However, pre-tax operating income was $311 million, down 5% year over year.

Drilling Group: Revenues of $2,120 million rose 5% year over year. Pre-tax operating income was $301 million, up 38% year over year.

Production Group: Revenues recorded by this group increased 37% from the year-earlier quarter to $2,876 million. Pre-tax operating income skyrocketed 212% year over year to $283 million.

Cameron Group: This segment generated revenues of $1,297 million, down 3% year over year. Pre-tax operating income plunged 10% from the prior-year comparable period to $194 million.

Financials

As of Sep 30, 2017, the company had approximately $4,952 million in cash and short-term investments and $15,871 million in long-term debt. This represents a debt-to-capitalization ratio of 30%. In the July-to-September quarter, the company bought back 1.5 million shares.

Q3 Price Performance

During the third quarter of 2017, Schlumberger has rallied 6%, outperformed the industry’s 1.7% gain.

Guidance

For 2017, the company projects investments of $2.1 billion, lower than the prior projection of $2.2 billion.

Key Development

In a separate announcement, the company declared the execution of an agreement with Cenovus Energy (TO:CVE) . Per the deal, Schlumberger and Torxen Energy will purchase the Palliser block for roughly $1 billion in cash.

The Alberta, Canada-based block comprises prospective oil and natural gas wells and extensive pipeline assets.

Zacks Rank

Schlumberger currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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