EUR 850.00 For Business Accounts Only

Morningstar | Schlumberger continues to be at the forefront of oil-services innovation.

Among oilfield-services companies, Schlumberger has long stood in a class of its own. Underpinned by its moat and strong management, the company has earned solid economic profits for decades. It reached the front of the pack in wireline evaluation in the 1920s, and it hasn’t relinquished its position since. Since then, Schlumberger has used its unrivaled expertise in understanding oil & gas reservoirs to not only drive a continuous stream of profits in its legacy business lines (embedded in the Reservoir Characterization segment), but the company has also applied this knowledge to develop other oilfield service business lines with nearly unwavering success. As just one of many examples, the company pioneered directional drilling in the mid-1980s, a technology that today is recognized as an indispensable ingredient in the shale revolution. Looking forward, Schlumberger is now aiming its expertise in a somewhat new direction--lowering the cost per barrel of oil & gas development via the provisioning of integrated services. Management believes that a combination of Schlumberger’s unique technologies along with a new business model embodying full integration and alignment of interests will allow for transformational leaps in oilfield efficiencies and reservoir productivity. In the company’s fast-growing and highly profitable Schlumberger Production Management (SPM) business, this vision seems to be turning into reality. While we take a balanced view with respect to SPM’s growth prospects, we do think the business will play a key role in maintaining Schlumberger’s moat and continuing the company’s legacy of value creation. We expect that Schlumberger’s traditionally successful business lines will come under increasing pressure in years to come, owing to a sustained downturn in exploration activity. Although we think Schlumberger can still maintain economic profits in its exploration-driven business lines, just as the company did in the very weak early-1990s, the level of these economic profits are likely to be significantly lower than in the past.