SLB - Embedded Expectations Analysis - 2019 08 06
Schlumberger Limited (SLB:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) Earnings, with a 21.0x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management has concerns about revenues, oil prices, and their international operations.Specifically, management may lack confidence in their ability to improve their ROC and ROE, and they appear concerned about their ability to maintain access to rigs for their Integrated Drilling operations in the Middle East following the divestiture of their land drilling rig business in the same geography. Additionally, they may lack confidence in their ability to meet their upcoming dividend payments and debt reduction objectives. Furthermore, they may be concerned about the sustainability of recent revenue and free cash flow levels, and they appear concerned about the sustainability of North American offshore revenue growth. Moreover, they appear concerned about continued revenue headwinds from North American land drilling activity, and they appear concerned about the sustainability of recent Europe/CIS/Africa revenue growth. Finally, management may lack confidence in the effectiveness of production cut agreements in keeping oil pricing strong, and they appear concerned about ongoing pricing headwinds.
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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