VALUATION HIGHLIGHTS

1. Production Systems constitute 33% of the Trefis price estimate for SLB's stock.
2. Drilling constitutes 32% of the Trefis price estimate for SLB's stock.
3. Digital & Integration constitutes 18% of the Trefis price estimate for SLB's stock.

WHAT HAS CHANGED?

SLB Q4 2025 Snapshot

SLB reported fourth quarter 2025 revenue of 9.75 billion dollars, up about 9 percent sequentially and slightly ahead of consensus, while adjusted earnings per share of 0.78 dollars exceeded estimates of 0.74 dollars. GAAP earnings per share came in at 0.55 dollars, and net income was approximately 824 million dollars, improving from the prior quarter but below the prior year period. Adjusted EBITDA was roughly 2.33 billion dollars, broadly stable versus the prior year, with sequential margin expansion supported by digital and production systems growth. Operating cash flow was close to 3.0 billion dollars in the quarter, driving strong free cash flow and supporting ongoing share repurchases and dividends. For full year 2025, revenue and earnings declined versus 2024 levels, reflecting softer activity in certain international markets and pricing pressure.

Outlook

SLB guided to mid single digit revenue growth in 2026, with full year revenue expected in the range of 36.9 billion to 37.7 billion dollars and adjusted EBITDA of roughly 8.6 billion to 9.1 billion dollars. Management expects a typical seasonal dip in the first quarter before activity improves through the year, with a stronger exit rate in Q4 2026 versus Q4 2025. The company also plans to return more than 4 billion dollars to shareholders through dividends and buybacks, while maintaining disciplined capital spending.

BUSINESS SUMMARY

SLB provides upstream reservoir characterization, drilling, and exploration services for the oil and gas industry. SLB's services are required by integrated oil companies such as Exxon Mobil, National Oil Companies (NOCs) like Saudi Aramco, and independent producers to explore, develop, and service their oil resources. The company has an extensive geographical reach, conducting business in over 80 countries and providing products and services for oil and gas exploration, including seismic services, drilling, and post-drilling services.

KEY TRENDS

High Oil Prices Pushing Drilling Demand

Oil prices started plummeting in mid-2014 due to the demand-supply mismatch in the global oil markets. This resulted in weaker oilfield service activity throughout 2015 and 2016, as oil and gas companies curtailed upstream spending due to falling cash flows. This severely hit the business of oilfield services companies till 2019. Then, The impact of the COVID-19 pandemic hammered the oil industry in 2020, as governments closed businesses and restricted travel. However, oil prices saw a rebound on the news of the planned rollout of multiple COVID-19 vaccines by the beginning of 2021.

Oil prices rose early in 2022 as a surprising economic rebound drove demand for oil after several months of lockdowns. Secondly, the supply was not able to respond to increased demand as OPEC was probably cautious not to oversupply the market again, and the fact that oil production has long investment cycles. Lastly, the oil prices also increased sharply due to the conflict in Ukraine and sanctions on Russia.

To limit the excess supplies and stabilize prices, the OPEC+ group in April 2023 decided to cut production and has since continued to extend these cuts. Despite the OPEC+ group’s decision to extend their production cut, weakness continued in global oil markets on faltering demand from China and swelling American supplies in 2024. Escalating geopolitical tension also added pressure on the demand outlook of the commodity. Oil has been trading in a tight range since then. It was broadly congested inside $90-$67 per barrel on worries that supplies will exceed demand.

SLB is largely at the mercy of market conditions, and the tepid oil price growth is not helping either. Oil prices in 2025 were volatile but ended lower, as brief spikes from geopolitical tensions were outweighed by oversupply and weak demand growth driven by strong U.S. shale output, easing OPEC+ cuts, rising inventories, and a slowing global economy.

Several key factors are poised to shape the global oil market in 2026.

In 2026, the oil market will be driven mainly by oversupply risk versus subdued demand growth, with resilient non-OPEC production, uncertain OPEC+ output discipline, and slowing global consumption keeping prices capped, while geopolitics and macro conditions inject periodic volatility rather than sustained upside.

Exploration of deepwater and other remote sources of oil and gas Increasingly over the past few years, significant oil and gas finds have been in deepwater and other remote locations such as the CIS and Iraq. Exploiting these sources adds tremendous logistical and technical complexity to the exploration projects that translate into revenues for upstream products and services firms such as SLB.

Exploration of deepwater and other remote sources of oil and gas

Increasingly over the past few years, significant oil and gas finds have been in deepwater and other remote locations such as the CIS and Iraq. The exploitation of these sources adds tremendous logistical and technical complexities to the exploration projects, which translates into higher revenues and lower competition for upstream products and services firms such as SLB. Additionally, projects such as Deepwater provide opportunities for longer-term contracts and the ability to provide integrated services.

New oil and gas discoveries in Brazil and other Latin American countries

Several of the largest oil and gas discoveries in the past five years have been in Latin America, including several multi-billion-barrel offshore finds in Brazil. These discoveries are attracting investments from local oil companies such as Petrobras, as well as foreign oil majors such as Chevron and PetroChina. Exploration in this area is expected to improve SLB's revenue and profit outlook in the region.

Exploration for unconventional sources in Europe, Latin America, the Middle East, and Asia

Exploration for unconventional sources such as shale and tight gas is expected to pick up in Argentina, Mexico, Poland, China, and Saudi Arabia over the next several years, resulting in higher revenues and operating profits for SLB in these regions.

Efforts to arrest decline rates in aging fields

Oil firms are investing in technology to help them reduce the decline rates seen in major fields over their lifetime. For instance, Mexico's Pemex has been engaged in efforts to arrest the decline in its Canterall fields, while Saudi Aramco has also made it a priority to reduce the decline in its fields by 2-3% per year.