SLB reported slightly better-than-expected third-quarter profit Friday, though sales fell just short. The oil field services giant sounded optimistic about its international operations growth, even as the Middle East's Israel-Hamas war clouds the oil market outlook. SLB stock fell Friday as U.S. crude oil prices hovered around $90 per barrel.
West Texas Intermediate (WTI) crude oil prices traded around $90 per barrel Friday, in a busy week for oil markets. Traders continue to assess the global supply outlook amid concerns the Israel-Hamas war will escalate and disrupt the region's oil supply chains.
Iran called on Arab countries to impose an oil embargo on Israel. However, the Organization of the Petroleum Exporting Countries (OPEC) has not given any sign it will take such action. The U.S. also eased sanctions this week on Venezuela, issuing a six-month license authorizing transactions in Venezuela's oil sector.
Meanwhile, the U.S. announced plans to buy six million barrels of crude for delivery in December and January to replenish the Strategic Petroleum Reserve. On Wednesday, the U.S. Energy Information Administration reported a larger-than-predicted inventory draw last week.
Against this backdrop, SLB, formerly known as Schlumberger, one of the world's largest providers of on- and offshore field services, kicked off earnings season for the industry's services firms. Rivals Baker Hughes and Halliburton report earnings next week.
Rig Activity Key
Meanwhile, last week saw oil drilling activity pick up as the oil rig count increased by four rigs to a total of 501 rigs currently drilling for oil in the U.S., according weekly data from to Baker Hughes. The total active U.S. rig count, which includes those boring for natural gas, climbed by 3 to 622. That was 147 rigs above the same week in 2022.
"While only a modest increase, it is still the largest weekly increase since March," ING analysts wrote Monday. "Rig count changes in the weeks ahead will need watching because if this continues, it will suggest that U.S. producers could be relaxing the capital discipline we have seen from them in recent years amid the higher price environment."
On Friday, Baker Hughes data showed the total number of active U.S. oil rigs increased by 2 to 624, still down 147 from last year.
SLB Stock
SLB stock fell 2.8% to 58.28 Friday during market action, signaling a move back below the 50-day line. On Thursday, SLB dropped more than 1% to 59.97. Baker Hughes stock dropped 2% Friday while Halliburton stock declined 2.7%.
SLB Earnings:
Estimates: Analysts predicted third-quarter SLB earnings would grow 22% to 77 cents per share with sales increasing 12% to $8.32 billion. SLB has averaged 69% profit growth over the past four quarters.
Results: SLB reported earnings growing 24% to 78 cents per share while revenue increased 11% to $8.31 billion. That marks the second straight quarter of slowing growth, in part due to tougher comparisons.
The vast majority of SLB's sales came from its international work. SLB international revenue grew 12% to $6.61 billion while its North America segment totaled $1.64 billion, up 6% vs. last year but down 6% compared to last quarter.
Sales from its well construction segment totaled $3.43 billion in Q3, up 2% sequentially and a 11% increase year-over-year.
SLB Chief Executive Olivier Le Peuch in the earnings statement Friday said the company's Q3 performance was propelled by "broad-based growth" across Saudi Arabia, the United Arab Emirates, Kuwait, Oman, Indonesia, China and Malaysia.
"I am very pleased with these results, which demonstrate how SLB is continuing to seize this multiyear growth cycle," Le Peuch said.
SLB stock is almost five weeks into a flat base with a 62.12 buy point. MarketSmith daily charts shows the base to be 27 days long, which makes it a valid base (longer than 25 days) even though the base doesn't appear on the weekly chart.
SLB stock is up 17% in 2o23.
On Tuesday, Barclays raised its price target on SLB stock to 75, up from 70, and maintained an overweight rating on the shares. The firm says the production-related spending cycle is still in the early stages. That's a positive for the energy services sector.
Morgan Stanley analyst Daniel Kutz on Tuesday wrote that SLB's portfolio, which is oriented to international and offshore markets, is set to "benefit from substantial demand growth in core oil-producing areas." Kutz has a 62 price target on SLB stock.
Back on July 21, SLB narrowly topped Q2 profit expectations but missed on revenue. At the time, SLB earnings — along with financials from rivals Baker Hughes and Halliburton — pointed to slumping U.S. oil-drilling activity, with international activity increasing.
Optimistic About Long-Term Prospects
SLB Chief Executive Olivier Le Peuch added Friday he remains optimistic about the long-term outlook for the industry. On Friday, he said the oil and gas sector continues to benefit from a multi-year growth cycle that has shifted to the international and offshore markets.
"Looking ahead, we believe the market fundamentals remain very compelling for our business," Le Peuch said. He added that SLB expects to see sequential revenue growth in the fourth quarter.
For the year, Wall Street predicts SLB profit will grow 37% to $2.97 per share as sales increase 17% to $32.96 billion.
IBD ranks SLB stock fifth in the Oil & Gas-Field Services industry group, behind Halliburton. Shares have a 98 Composite Rating out of 99. SLB stock has an 89 Relative Strength Rating, an exclusive gauge for share-price movement. The EPS Rating for SLB stock is also 89.
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