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SLB - Embedded Expectations Analysis - 2017 11 03

- Schlumberger Limited (SLB:USA) currently trades near historical lows relative to UAFRS-based (Uniform) Assets, with a 2.3x Uniform P/B. However, even at these levels, the market has bullish expectations for the firm, which may be unwarranted given management's concerns about their operations and macro environment

- Specifically, management has concerns about potential headwinds related to their production reactivations, and continued declines in Cameron's long cycle businesses. They also appear concerned about activity in their international markets, particularly Latin America and Russia. Should the firm fail to drive Uniform ROA back towards historical averages, as management sentiment suggests, equity downside would be warranted


Schlumberger provides technology for reservoir characterization, drilling, production and processing to the oil and gas industry. The company has four segments: Reservoir Characterization, which consists of the principal technologies involved in finding and defining hydrocarbon resources; Drilling, which consists of the principal technologies involved in the drilling and positioning of oil and gas wells; Production, which consists of the principal technologies involved in the lifetime production of oil and gas reservoirs; and Cameron, which consists of the principal technologies involved in pressure and flow control for drilling and intervention rigs, oil and gas wells and production facilities.

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