We are maintaining our long-term Neutral recommendation on
), a leading oilfield services company that
provides technology, project management and information
services to the global oil and gas industry.
HALLIBURTON CO (HAL): Free Stock Analysis
SCHLUMBERGER LT (SLB): Free Stock Analysis
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Schlumberger recorded better-than-expected second quarter profit,
which surged 22.1% from the year-earlier quarter and 9.4%
sequentially. The company was bolstered by strong performances in
global exploration and deepwater activity, as well as efficiency in
In the international arena, offshore growth and certain land
markets strengthened the company's second quarter results. Latin
America, the Middle East and Asia showed solid progress, while the
Europe/CIS/Africa region registered the top performance. Moreover,
the international shale opportunity continues to develop, and we
expect it to be a significant opportunity for Schlumberger. We
believe Saudi Arabia, Australia and China have the best prospects
at the moment.
The company continues to expect the international rig count to grow
by more than 10%. Service capacity continued to tighten and
Schlumberger is successfully pushing pricing on small contracts
through technology upgrades.
We believe Schlumberger is favorably positioned to operate within
the current oilfield services scenario, given theincreased
international drilling activity, pricing improvements and an
expected recovery in its seismic operations. Schlumberger should
also benefit from its oil-driven international growth prospects,
given its leading position in exploration drilling.
However, weak natural gas prices have impacted the demand for
gas-directed activity in North America. As Schlumberger has a vast
exposure in the region, its share prices may be depressed going
forward. Importantly, the second quarter registered deterioration
in growth and profitability from the North American market as
gas-based activity continued to decline. Hydraulic
fracturing-related work continues to face difficulty from
overcapacity and will likely continue to decline this year.
While Schlumberger − which ranks ahead of
) as the biggest member of the oilfield services contingent − hopes
to gain market share against its peers in 2012, we expect pricing
and margins to remain restricted in North American pressure