SLB - Q1 2015 earnings and industry outlook | SLB Message Board Posts

Schlumberger Limited

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Msg  82 of 93  at  4/23/2015 2:20:03 PM  by

crystalkid

The following message was updated on 4/23/2015 2:20:03 PM.

SLB - Q1 2015 earnings and industry outlook

SLB recently reported Q1 2015 earnings which were not as bad as expected.
 
Recent pro-active cost cutting seems to have lessened the impact of the slowdown in E&P spending by the oil companies.
Revenues   10.25 billion down 9% YoY.
Sales  declined 19% from prior quarter.
Pre-tax profit margins 19.4% of sales, down 2.5% from Q4 2014, and 1.6% YoY.
Adjusted earnings 1.36 billion (down 30%) equivalent to 1.06 USD per share.(excl extraordinary items).
 
Another round of job cuts (11,000) to bring the total to approx. 15% of the workforce (20,000 total cuts).
and a 40% cut in capital spending. 
Share buybacks totaled 8.7 million shares.
 
Bought a 49% minority stake in Eurasia drilling, a Russian drilling company.
 
Forward earnings estimate of 3.50 to 4.00 USD a share at end of 2015. 
 
Forward PE of x26 , for the share price at the current levels; which is somewhat high.
 
Share price is only down 8% from the previous year and down 20% from the all-time high, but also recovered 20% from the lows in January.
 
Lower oil prices had a big impact on demand for Schlumberger's products while a strong dollar hurt reported sales as well. But SLB is the best in the business, and whats more their nearest rival HAL has its eyes firmly fixed on making its proposed merger with BHI, work. SLB will still be the largest player in the market.
 
But there is going to be no quick return to recent peaks.
 
Has the bottom in the oil services sector been reached. If you look at the recent share price action - you would perhaps begin to think so.
But the rig count activity is still declining, although at a slower pace than at the start of 2015. It traditionally takes 2 or 3 quarters of slowdown in rig activity, before a bottom can be called. So perhaps June is really the earliest we can assume the rig count begin to stabilize.
But stocks generally bottom before the industry bottoms.
So does the recent uptrend of the oilfield services stocks indicate that the market also thinks the bottom of the stock prices has been reached.??
Is it a good time to accumulate stocks ??
 
Even though drilling activity has declined, production has in fact increased. How ???
By companies choosing to concentrate on the best, most economic and productive wells; and maintain production. 
 
But the services companies will see a continued decline in earnings, and activities; as new wells and completions have decreased. This will likely continue for the next quarter. E&P companies will defer production until oil prices start to increase; unless the company requires a certain level of production to be maintained in order to service debt repayments.
 
I think it is an appropriate chance to begin to slowly accumulate positions in the best, least leveraged plays in anticipation of growth into the latter half of the year.  
 
Regards
 
crystalkid 
  
 
 
 
 
 
 
 
 
 
 


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