Yesterday, 7:44 AM
- In his "We Are Full of Bull" note this morning, Morgan Stanley's Adam Parker says the economy will accelerate in Q2 and Q3, bringing stocks along for the ride. If investors are gun-shy thanks to record levels for the averages, Parker suggests looking for names with decent long-term earnings forecasts trading at a discount to the market.
- The ten largest U.S. stocks trading at a discount, but with above-average expected growth rates: Apple (NASDAQ:AAPL), Citigroup (NYSE:C), Gilead (NASDAQ:GILD), Union Pacific (NYSE:UNP), Actavis (NYSE:ACT), Twenty-First Century Fox (NASDAQ:FOXA), Time Warner (NYSE:TWX), Ford (NYSE:F), BlackRock (NYSE:BLK).
- Conversely, one might want to avoid those stocks selling for substantial premiums. The ten largest stocks trading at a premium to the market while growing at a below-average rate: Exxon (NYSE:XOM), Procter & Gamble (NYSE:PG), Chevron (NYSE:CVX), Coca-Cola (NYSE:KO), Pepsico (NYSE:PEP), Schlumberger (NYSE:SLB), MMM, McDonald's (NYSE:MCD), UPS, Nike (NYSE:NKE).
- Source: Bloomberg
Mon, Apr. 20, 1:32 PM
- Schlumberger (SLB +0.3%) is maintained with a Buy rating but a higher stock price target of $110, up from $95, at UBS, which notes that while expecting industry conditions to remain challenging this year and next, the company has impressively cut costs and stayed ahead of the curve leading to lower decremental margins than widely expected.
- However, UBS still believes the industry capacity will remain over-supplied in 2015-16, thus dampening pricing; additionally, SLB and the firm expect only a moderate recovery in North America drilling; however, strong cost management and lower decrementals leads the firm to increase its EPS forecast for SLB by 15%-24% in 2015-17.
Sat, Apr. 18, 8:25 AM
- An eventual recovery in U.S. oil drilling activity "will fall well short of reaching previous levels," because of a growing reserve of wells that have been drilled but not yet hydraulically fractured and increased activity in re-fracking wells that are running dry, Schlumberger (NYSE:SLB) CEO Paal Kibsgaard said in Friday's earnings conference call.
- At least 2,700 wells have been identified as candidates for re-fracture in North America, representing a total market value of ~$5B, says EvercoreISI's James West, adding that the Eagle Ford likely contains 1,000 of the wells while the Bakken has ~500.
- The assessment suggests the disconnect between oil rigs and the trajectory of U.S. production may get worse before it gets better; while output had been rising in tandem with the number of rigs, production has continued climbing even as the rig count has collapsed to less than half its October 2014 peak.
- ETFs: XLE, VDE, ERX, OIH, XOP, ERY, DIG, DUG, XES, IYE, IEO, IEZ, FENY, PXE, PXJ, RYE, FXN, DDG
Fri, Apr. 17, 3:25 PM
- A prolonged period of low oil prices will be difficult for energy stocks, and Schlumberger (SLB +0.2%) is no different, but analysts say the company is showing it is adjusting to the new normal and still finding ways to squeeze efficiencies from its businesses, with the latest job cutbacks providing the most recent example.
- Analysts say SLB's costs fell in line with revenue due to rapid reductions in variable costs, improved execution and the acceleration of the company’s internal efficiency initiatives.
- Despite lower pricing and activity in the industry that has pushed sales down, SLB’s execution and aggressive cost-cutting initiatives "resulted in outstanding margin performance vs. our expectation,” Wells Fargo says; SLB's international margins of 24% were "surprisingly resilient," Morgan Stanley says, marking a Y/Y jump of ~130 bps, which "translates into 25% decrementals, vs. our expectation of 40%, suggesting that SLB's cost reduction efforts are bearing fruit."
- In its earnings conference call, SLB says it expects to maintain the cash quality of its earnings by continuing to convert 75% or more of net income into free cash flow.
Thu, Apr. 16, 5:27 PM
- Schlumberger (NYSE:SLB) +2.5% AH after Q1 earnings fell sharply Y/Y but beat Wall Street estimates, and the company said it would cut another 2K jobs.
- SLB now plans to cut another 11K jobs, leading to a total workforce reduction of ~15% compared to the peak from last year's Q3, after laying off 9K employees late last year; SLB recorded a related $390M pretax charge in Q1.
- SLB had warned that its North American operations would be hardest hit by the plunge in oil prices, and its Q1 North America revenue fell 13% to $3.2B; most of SLB’s operations are international, where Q1 revenue fell 8% to $6.9B.
- CEO Paal Kibsgaard says the company believes "a recovery in U.S. land drilling activity will be pushed out in time, as the inventory of uncompleted wells builds and as the re-fracturing market expands, [but] a recovery in activity will fall well short of reaching previous levels, hence extending the period of pricing weakness."
- SLB also says it is cutting its 2015 capex guidance to $2.5B from an earlier estimate of $3B and down from $4B spent last year.
- S&P analyst Stewart Glickman says it is hard to see where the company and its rivals can cut without slicing into muscle.
- SLB's two largest competitors, Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI) - which agreed to merge last year - are scheduled to report earnings next week.
Thu, Apr. 16, 4:09 PM
Thu, Apr. 16, 1:04 PM
Wed, Apr. 15, 5:35 PM
Wed, Apr. 15, 3:15 PM
- May crude oil futures rose 6% today to $56.25/bbl, the highest settlement of the year, enjoying a boost from a higher global oil demand forecast from the International Energy Agency and another rise in U.S. crude supplies.
- The weekly inventory report showed a lower-than-expected 1.294M-barrel build in inventories, enough to send U.S. crude oil inventories to 483.7M barrels for their highest level at this time of year in at least 80 years.
- The narrative that oil prices may have found a bottom is beginning to pick up, which is helping drive buying interest in energy stocks; among today's gainers are XOM +1.9%, CVX +1.6%, COP +1.6%, BP +1.4%, RDS.A +2.9%, HES +4.5%, SLB +2.9%, HAL +3.9%.
- ETFs: USO, OIL, XLE, UCO, UWTI, VDE, ERX, OIH, SCO, XOP, BNO, DBO, DWTI, ERY, DIG, DTO, DUG, USL, XES, IYE, IEO, IEZ, DNO, FENY, PXE, PXI, PXJ, OLO, SZO, RYE, FXN, TWTI, OLEM, DDG
Mon, Apr. 13, 11:24 AM
- "No one (including us) has a really good handle on energy industry earnings estimates over the next few years," says J. Marshall Adkins and team at Raymond James, downgrading Cameron International (CAM -1%), Nabors Industries (NBR -0.3%), Schlumberger (SLB -0.8%), FMC Technologies (FTI -1.5%), and Basic Energy Services (BAS -6.6%).
- Nevertheless, Adkins gives it his best shot and his numbers are well below the Street for 2015 and 2016. Then there's valuations, and the recent surge in prices has left them less than compelling.
- Noted is substantial pricing pressur and overcapacity in many business lines, a more prolonged downturn internationally, and offshore activity not expected to see even a moderate uptick for several years.
- Source: Barron's
- Previously: Schlumberger slips as Raymond James heads to the sidelines (April 13)
- Previously: Raymond James throws in the towel on oil services (April 13)
Mon, Apr. 13, 8:42 AM
- Noting valuation, international exposure and continued weakening in offshore oil over the next two years, Raymond James downgrades Schlumberger (NYSE:SLB) to Market Perform from Outperform.
- The stock's lower by more than 20% from last summer's high, but ahead 4% YTD.
- Shares -0.55% premarket.
- See also: Raymond James throws in the towel on oil services (April 13)
Tue, Apr. 7, 12:59 PM
- Peabody Energy (BTU +7.3%) spikes higher after Balyasny Asset Management's Christian Zann tells CNBC he likes the stock as a value play in the coal space.
- Zann points out that coal is a relatively low capital intensive business vs. shale producers, who must spend considerable sums drilling new wells to maintain a production base.
- Zann likes Schlumberger (SLB +1%) and Halliburton (HAL -1.3%) among oil services stocks, and Marathon Oil (MRO +1.3%) in the E&P group.
Mon, Apr. 6, 11:49 AM
- Schlumberger (SLB +2.2%) is higher after Russia's energy minister said the country would not oppose a deal with SLB for the purchase of a 45.65% stake in Eurasia Drilling on the condition that certain risks are offset.
- SLB agreed in January to purchase a stake in Eurasia, Russia's largest onshore drilling company, for $1.7B with the option to purchase the remaining stake at a later date; the deal was supposed to close by the end of March but last week the deadline was pushed back to the end of April.
- Russia’s Federal Antimonopoly Service has not yet provided a full list of conditions to SLB, but one possible conditions is that SLB would have to sell the Eurasia stake to Russian investors if further sanctions against the country block its operations.
Wed, Apr. 1, 3:38 PM
- Even if oil prices rebound, oilfield services firms have a tough year ahead as producers squeeze them for deeper discounts, Moody’s says in a new analysis, predicting that the industry is headed for a “deep, protracted cyclical downturn."
- Because many oil companies are drilling but not completing wells, oil services firms that provide production-related services will fare better than those offering pressure pumping, seismic services and other exploration-type activities.
- No company is immune, but the big three - Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI) - are best positioned because they are large, diverse, well-funded and have operations outside of North America, Moody's says, while Paragon Offshore (NYSE:PGN) and Hercules Offshore (NASDAQ:HERO) will see the sharpest decline in earnings as contracts expire for their fleet of older-generation jackup rigs.
- Moody’s expects to see more offshore firms stack rigs, delay rig deliveries and write down assets as contracts get changed or canceled;lLand drillers will not fare much better, particularly those operating in expensive U.S. shale plays.
- ETFs: OIH, XES, IEZ
Mon, Mar. 30, 12:22 PM
- Russia's Eurasia Drilling says it will extend the deadline on its proposed deal to sell a stake to Schlumberger (SLB +0.6%) to April 30 from March 31, as Russian officials are yet to grant the approvals needed for the deal to be completed.
- SLB said last month that planned to buy a 45.65% stake in Eurasia for $1.7B, potentially paving the way for it to become the sole owner of Russia's most active oilfield services company.
Thu, Mar. 26, 12:22 PM
- Schlumberger (SLB +0.2%) must satisfy a list of conditions, in part linked to sanctions, to gain approval for its $1.7B bid to buy Russia's Eurasia Drilling, says the head of Russia’s commission on foreign investment, which will meet with SLB executives in the next 10 days.
- One condition could require SLB to sell Eurasia if sanctions impede the company’s work, according to the Russian official.
- Lukoil, Eurasia’s largest customer, is backing the deal, saying it would be good for Russia; Lukoil CEO Vagit Alekperov owns ~3% of the driller’s shares.
SLB vs. ETF Alternatives
Schlumberger NV is a supplier of technology, integrated project management and information solutions to customers working in the oil and gas industry. Its business segments areReservoir Characterization Group, Drilling Group and Production Group.
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