Oilfield Services Week In Review: Higher Land Rig Count, Schlumberger’s Probable Contract Win

September 22nd, 2014 by Trefis Team
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The U.S. oilfield services space had something to cheer about last week, as the domestic land rig count touched a two-year high on the back of higher oil-directed drilling. In other news, Bloomberg reports that Schlumberger (NYSE:SLB), the largest oilfield service provider, could be poised to win major wireline contracting work from Brazil’s Petrobras (NYSE:PBR).

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U.S. Land Rig Count At A Two Year High

According to data from Baker Hughes (NYSE:BHI), the total U.S. land rig count (including inland waters) rose to 1869 rigs during the week ending September 19, up from 1862 rigs a week ago. [1] This marks a 2 year high for the U.S. land rig count. Rig counts are driven by the exploration and development spending of oil and gas companies and are influenced by the outlook for hydrocarbon prices. The U.S. land rig count has risen by over 10% over the last year, driven primarily by higher horizontal drilling activity in regions such as the Permian basin, where operators are seeking to cash in on under-tapped unconventional resources such as shale oil. (see: Why The Shift To Unconventionals In The Permian Will Help Oilfield Services Companies)

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Schlumberger In Position To Win Petrobras Contract

Schlumberger, the world’s largest oilfield service company, could be set to win half of the over $2 billion worth of wireline related contracting work being offered by Brazil’s Petrobras, according to people with knowledge of the tender. ((Schlumberger Said Set to Win Petrobras Service Contract, Bloomberg, September 2014)) The company’s competitors Halliburton and Baker Hughes could be positioned to win 30% and 20% of the contract work respectively. Wireline services are used by oil and gas companies to carry equipment into wells for testing, evaluation and maintenance. Schlumberger is the market leader in wire-line services, and the product line accounts for an estimated 13% ($6 billion) of the company’s revenues. [2] The global wireline services market is estimated to stand at around $20 billion. [2]

  • Trefis has a $135 price estimate for Schlumberger, which translates to a $175 billion market cap for the company. Our price estimate implies a 30% premium to the current market price. We project the company’s FY 2014 revenues and EPS  to stand at around $49 billion and $5.59 respectively. Reuters has a consensus EPS estimate of around $5.67.
  • Schlumberger’s stock was up by around 1% last week.

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Notes:
  1. North America Rig Count, Baker Hughes [↩]
  2. Oilfield Service Factbook, Howard Weil, March 2014 [↩] [↩]