WFS------ Key Takeaway. We believe SLB remains one of the most attractive OFS names in our coverage universe with significant leverage to early-stage growth in international and offshore activity, a renewed focus on returns and cash flow, and an emerging plan to improve execution and profitability in its lagging NAM segment. For 2Q19 results, we expect a modest beat as well as solid commentary and guidance for international revenue and margins, but expect cautious commentary for NAM in 2H19.
Improving International Growth Playing To SLB’s Strengths. Virtually all of our recent OFS company meetings suggest international activity is tracking solidly in line with guidance (highsingle-digit growth in 2019), with increasing potential for margin improvement as i) start-up costs roll off and efficiency improves among integrated projects (like the Saudi drilling contracts), and ii) SLB and its competitors increasingly rationalize their footprints and pricing levels in the most depressed geographies like Asia and Africa. Importantly, we believe SLB is likely the biggest beneficiary of this trend due to its heavy international OFS mix and market leadership in many key product lines.