Oilfield service giant Schlumberger topped earnings and revenue estimates Friday, with the company reporting worldwide oil and gas drilling momentum. Schlumberger earnings come amid energy pricing volatility and an uncertain outlook for oil and gas production as producers have appeared to hedge on whether to up production with the possibility demand could fall off during a recession. SLB stock soared during market trading Friday.
Schlumberger Earnings: SLB Stock
Estimates: Wall Street forecast Schlumberger earnings growing 53% to 55 cents per share in Q3. Analysts expected revenue to increase 22% to $7.1 billion, according to FactSet.
Results: Schlumberger earnings grew 75% to 63 cents per share while revenue increased 10% to $7.5 billion.
"The second half of the year is off to a great start with strong third-quarter results that reflect the acceleration of international momentum and solid execution across our Divisions and areas," CEO Olivier Le Peuch said in a statement.
Le Peuch added the company's revenue growth was led primarily by well construction and production systems as "global activity strengthened, particularly in the offshore and international markets."
SLB stock advanced 10% to 50.30 during Friday market trading. On Thursday, shares edged up 0.5% to 45.69. Schlumberger shares have formed a cup pattern with a 49.93 buy point, according to MarketSmith.
The company is one of the world's largest providers of offshore drilling services. It also provides technology for well drilling, production, and oil and gas processing.
In Q2, Sales increased 20% to $6.8 billion. Schlumberger earnings increased 66% to 50 cents. In July, SLB updated its forecast for the remainder of 2022.
The company expects full-year revenue of at least $27 billion. In Q1, the company increased its revenue by 14% to $5.9 billion. Its EPS jumped 62% to 34 cents. SLB is expecting year-over-year revenue growth in the midteens and adjusted EBITDA margins at least 200 basis points higher than Q4 2021.
SLB stock ranks second in the oil and gas field services industry group. Schlumberger has a 98 Composite Rating out of 99. The stock has a 96 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement. The EPS rating is 79.
Oil And Gas Market
Beyond Schlumberger earnings, U.S. crude futures traded below $85 a barrel after settling at $85.98 on Thursday. Meanwhile U.S. natural gas prices dropped 4.8% to $5.10 per million British thermal units, tacking toward a sixth straight decline.
In early October, the Organization of the Petroleum Exporting Countries and its key allies including Russia, known as OPEC+, decided to cut production by 2 million barrels per day in November. Meanwhile, President Joe Biden has been releasing millions of barrels of oil from the U.S. Strategic Petroleum Reserve.
On Wednesday, the president announced he plans to sell the last 15 million of 180 million barrels he had authorized for sale back in March. Biden's efforts to keep fuel prices down comes as the average price of gasoline at the pump has begun to increase once again. On Thursday the average price of gasoline was $3.83, according to AAA.
Biden also criticized oil companies for bringing in record profits in 2022 and prioritizing stock buybacks over oil production.
Oil Companies Prioritize Buybacks Over Production Gains
"So far, American oil companies are using that windfall to buy back their own stock, passing that money on to shareholders, not consumers," Biden said during a speech Wednesday. "My message to all companies is this: You're sitting on record profits. And we're giving you more certainty. You can act now to increase oil production. You should not be using your profits to buy back stock or for dividends — not while the war is raging."
Schlumberger Earnings: U.S. Oil Output
U.S. output rose about 0.1% to 11.8 million bpd in July, according to the Energy Information Administration (EIA). That's the highest level since April 2020, but still about 10% off the U.S. record of 13 million barrels set in November 2019.
In September, U.S. field production of crude oil averaged around 12.1 bpd, according to EIA data.
Meanwhile, the number of active oil rigs in the U.S. has also been on an upward trend. In the second week of October there were 769 active oil rigs in the U.S., an increase of seven from the previous week, according to Baker Hughes compiled data. BKR releases weekly oil rig counts every Friday. In early June, there were 727 active U.S. oil rigs, a 60% increase from last year's depressed activity.
The EIA reported on Oct. 19 that the number of wells completed on a monthly basis has outpaced the number of wells drilled since July 2020, resulting in fewer drilled but uncompleted (DUC) wells.
The agency predicts this will result in lag time for crude oil production to increase. The EIA added that in the oil and gas rich Permian Basin, there is limited pipeline capacity infrastructure which may also limit crude oil production growth.
U.S. crude oil production should run around 11.7 million barrels per day for all of 2022, an average increase around 700,000 barrels a day compared to 2021, according to the EIA.
EIA forecasts also suggest output in 2023 will rise to more than 12.6 million barrels per day. If this prediction holds, it would surpass the annual average record of 12.4 million barrels per day set in 2019.
More Oilfield Firms Report
On Wednesday, fellow oilfield service firm Baker Hughes topped earnings estimates but missed on revenue views for Q3. The company reported EPS growing 62% to 26 cents per share while sales edged up 6% to $5.4 billion.
The Texas-based company supplies oilfield services, products, technology and systems to the global oil and natural gas industry. The firm operates through multiple segments and provides products and services for on- and offshore operations.
Baker Hughes CEO Lorenzo Simonelli said Wednesday he expects continued price volatility in the oil market as demand growth likely softens under the weight of higher interest rates and inflationary pressures.
"We expect supply constraints and production discipline to largely offset any demand weakness. This should support price levels that are conducive to driving double-digit upstream spending growth in 2023," Simonelli said.
Simonelli added that BKR remains optimistic about its oilfield services segment and that growth is "clearly shifting more in favor of the international markets."
In North America, Simonelli said drilling and well completion activity is leveling off.
Following Baker Hughes and Schlumberger, Halliburton reports Q3 earnings early on Tuesday, Oct. 25. Analysts expect EPS to balloon 100% to 56 cents per share. Wall Street forecasts revenue growing 39% to $5.3 billion, according to FactSet.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
