Schlumberger Is Placing Pressure On Peers With New Sand Mines

Nov. 01, 2018 8:24 AM ETSchlumberger Limited (SLB)HAL84 Comments
Todd Akin profile picture
Todd Akin


  • Offshore revenues have turned a corner so much that they are now offsetting temporary weakness seen in SLB's robust land business. The stock should bottom from this point, alone.
  • OneStim is experiencing delays in completions, but these should be resolved when pipelines are built-out.
  • The real problem is de-bundling within the services sector, which SLB has addressed.
  • As a result, SLB is now placing pressure on peers and is poised for dominance in 2019 and beyond.

Schlumberger Limited (NYSE:SLB) reached an inflection point in the third quarter as international revenues outpaced North American revenues for the first time since 2014. In fact, all regions around the world, including the U.S., are experiencing higher decline rates in production, especially in Venezuela and Iran, which are requiring E&Ps to increase investments. If, not, oil prices will continue to rise, which will benefit all energy companies, in theory.

Actually, that statement is not entirely accurate. The sad reality is that services players are seeing margins shrink from oversupply of certain services segments, even with higher oil prices, due to de-bundling by E&Ps. If more E&Ps bring pressure pumping services in-house, as well as sand and other services, companies like SLB could continue to see pressure on their stock prices as earnings suffer.

SLB should be somewhat insulated from these fears, however, since they have vertically integrated into services and have a dominant offshore business that is now offsetting weakness with their OneStim hydraulic fracturing business.

Rather than focusing on the obvious positives in their offshore business (listed above), for the purposes of this article, I'd like to comment on the viability of oilfield services players as an investment in general, and take a harder look at the sustainability of SLB's North American land business. Current indications are pointing to a bright future for SLB's hydraulic fracturing business, especially in frac sand, which should prompt investors to take long positions at these depressed levels. Let's see what the tea leaves are telling us.

North American Business

Things aren't all that bad when a company reports revenues of $2.6 billion, and operating income of $1.2 billion (total, pretax). Yet, services players like SLB continue to get punished.

Onshore revenues struggled from temporary weakness in OneStim, but there was a lot to still

This article was written by

Todd Akin profile picture
Graduated from the University of Houston- Downtown with a degree in Finance. My site,, focuses on portfolio management and unique investment opportunities.

Disclosure: I am/we are long HCLP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (84)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.