Schlumberger (NYSE:SLB) reports Q4 earnings Friday. Analysts expect revenue of $8.1 billion and EPS of $0.37. The revenue estimate implies a 5% decline sequentially. Investors should focus on the following key items.

North America Could Finally Falter

Pursuant to oil services names, earnings season seems to center around who has exposure to the North America land drilling market and who does not. The sector has been white-hot for a few years and Schlumberger, Halliburton (HAL), and Baker Hughes (BHGE) have been sitting in the proverbial catbird seat. I have wondered out loud when North America would finally crack.

Schlumberger had been known more for its international operations. In Q1 2018, it acquired Weatherford’s (WFT) U.S. pressure pumping assets for $430 million. The deal amplified exposure to North America and helped close the gap between it, Halliburton and Baker Hughes. At Q3 2018, the company’s revenue from North America was 38% of total revenue, up from 24% two years earlier. RBC Capital Markets analyst Kurt Hallead was so ebullient on the Weatherford deal that he pondered whether it would lead to a merger with Schlumberger:

Hallead thinks the deal could spur more mergers and acquisitions in the U.S. fracturing industry. But he notes other possible outcomes, including Schlumberger buying Weatherford out of the joint venture, Weatherford selling its artificial lift business to Halliburton and Schlumberger buying out the rest of Weatherford — although that’s further down his probability scale. Read more:

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