SLB - Embedded Expectations Analysis - 2018 03 02
ï€ Schlumberger Limited (SLB:USA) currently trades near recent averages relative to UAFRS-based (Uniform) Assets, with a 2.7x Uniform P/B. At these levels, the market has bullish expectations for the firm, but management has concerns about their divestiture, the global oil market, and pricingï€ Specifically, management is confident in the weak financial state of the other seismic acquisition players, and are thus prepared for their divestiture process to take some time. Additionally, they may have concerns about the balance of the global oil market in 2018, and may also have concerns about high exceptional costs during the first quarter. Furthermore, they may be exaggerating their clear view on pricing, and may lack confidence in their continued presence in Venezuela
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.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
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Many years later, our business model remains because little has changed on Wall Street.
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- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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