Oilfield services giant Schlumberger (NYSE:SLB) will declare its Q1 results on April 20. While the company’s overall results will be buoyed by the growing interest in exploration and production activity across the world, the changing scenario in North America’s gas markets is expected to hit its earnings in this market. High oil prices are expected to fuel rig count growth across continents and the rising cost of exploration will help push revenues and profit margins up for Schlumberger and its competitors such as Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI).
We have a $100 price estimate for Schlumberger, which is at a 50% premium to its current market price.
North American market
Low gas prices are pushing exploratory activity toward liquids rich plays. The realignment in the industry is hurting utilization as well as operational efficiency of oilfield services players like Schlumberger. Focus on liquid rich plays is also lowering prices for certain product and service lines like pressure pumping.  Schlumberger is focusing on its shale reservoir workflow models to reduce wastage in shale exploration in this market. The workflow models are helping Schlumberger gain momentum in these markets, but the overall changes in the North American energy market are expected to still impact the company’s profitability in this region.
Schlumberger estimates that the growth in exploration and production in international markets will be robust. Rig counts are expected to grow in almost all geographies. The oilfield services firm is also looking for major growth in deepwater and unconventionals segments across the world. The company estimates that over 200 new deepwater fields will go into production over the next four years.  Schlumberger is also increasing its market share in the drilling segment, which should add to its overall revenue and profitability growth.
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