Seeking Alpha

Schlumberger's profits should gush - Barron's

  • Barron's cover story is positive about oil-services giant Schlumberger (NYSE:SLB), whose recent acquisitions have catapulted SLB into a position of leadership in extracting liquids from shale basins, part of the booming business in hydraulic fracturing that's reshaping the industry.
  • The acquisitions fix one of the company's few week spots, and should put it further ahead of smaller rivals like Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI).
  • CEO Paal Kibsgaard believes SLB can achieve a 10x increase in operational reliability, reduce inventory levels by 25%, boost asset utilization by 100%, raise productivity by 20%, and lower unit support costs by 10%. By 2017, he expects to boost EPS to $9-10 (from $5.70 this year).
  • Despite an 18% gain this year, shares looks cheap at about 9x estimated 2015 EV/Ebitda and eight times estimated 2016 EV/Ebitda vs. a historical multiple of 10 to 11.
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