How Will Schlumberger’s Profitability Move In The Next 3 Years?

by Trefis Team
Schlumberger Limited
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The commodity downturn over the last three years caused Schlumberger (NYSE:SLB), the world’s largest oilfield services company, to witness a huge decline in its profitability as well as cash flows. However, the company continued to sustain operations through acquisitions and investments to enhance its product offering and maintain its leadership position in the market. Below is a breakup of Schlumberger’s EBITDA by division and how each of them is expected to perform in the coming years using our interactive platform.

Recovery In Commodity Prices To Drive Profitability

In 2017, Schlumberger generated about 31% of its EBITDA from its Reservoir Characterization segment, which largely offers software integrated solutions (SIS) and integrated services management (ISM). With the extension of production cuts by OPEC and Non-OPEC members until the end of this year, Schlumberger expects the oil prices, and in turn, the demand for oil and gas drilling, to continue to grow in 2018 and beyond. This will allow the company to negotiate better pricing for its services that will boost its profitability.

Integrated & Cost Efficient Solutions Could Boost SLB’s Profits

Despite contributing about 35% of Schlumberger’s total revenue, the Production division, which offers the company’s most popular offering OneStim and Production Management (SPM) services, accounts for only 23% of its profits. This is largely because the products offered through this division have not been able to attract strong pricing in the present weak price environment.

That said, Schlumberger has been consistently working to improve its product offerings, by acquiring OneSubsea technology from Cameron in 2016 and hydraulic fracturing assets from Weatherford in 2017. Thus, the company’s integrated and cost efficient offerings are likely to get more traction in the current environment, where clients are looking to optimize their costs while maximizing their output. Hence, we expect the company’s profitability to witness a gradual rise in the coming years.

You can create your own forecasts for Schlumberger and its divisional EBITDA using our interactive platform.

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