What To Expect As Schlumberger Publishes Q1 Results

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Schlumberger (NYSE:SLB), the largest oilfield services provider, is expected to conduct a conference call to discuss its Q1 2018 results on Friday, April 20, reporting on a quarter that witnessed stronger rig activity, as oil prices remained relatively robust. While Schlumberger could be a big beneficiary of the improvements in the industry in the interim, it is possible that Q1 will emerge as a transitional quarter of sorts for the company, as it incurs costs relating to repositioning equipment and reactivating idle capacity in international markets. Below, we take a look at some of the factors that could drive Schlumberger’s earnings over the quarter. We have also created an interactive dashboard analysis outlining our expectations for the company for the full year.

Schlumberger’s Growing Exposure To U.S. Unconventionals

The company has increased its exposure to the unconventionals market, by acquiring Weatherford’s U.S. hydraulic fracturing and pump-down perforating business for $430 million in 2017. It’s possible that the production division will benefit from stronger activity in the U.S. land market, where the average rig count during Q1 rose to around 966, compared to 742 rigs in the year-ago period. Moreover, the mix of horizontally directed rigs has also been trending higher, indicating stronger demand for service such as fracking. Tight oil players have been able to bring down their marginal costs of production through the downturn via cost-cutting and improved efficiencies, making production profitable at current oil prices.

With the recovery in commodity prices, Schlumberger expects the demand for drilling services and other equipment to rise sharply through the year. The global rig count has expanded by more than 10% compared to last year, indicating that oil field activity is on the upswing. However, the company said that it would incur some one-off expenses as it would have to reposition some equipment to markets such as Russia and the Middle East, while incurring some costs related to reactivation of idle capacity.

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