We reaffirmed our Neutral recommendation on
) on Aug 7, 2013. The company remains well positioned to benefit
from the recent strength in oilfield services thanks to improving
activity levels. However, the activity weakness in North America
remains a concern.
Schlumberger- a leading oilfield services company - is
favorably positioned to benefit from current trends in oilfield
services, given improving activity levels and greater need for
stimulation and completion of services in North
Although operating margin slipped for the region during the
second quarter on a year-over-year basis, the pace of
deterioration is expected to slow down in the upcoming quarters
led by seasonally strong multi-client sales. While hydraulic
fracturing pricing and land drilling activity remain depressed
throughout North America, this was more than offset by strength
in the Gulf of Mexico.
In the international arena, the company experienced a strong
quarter and we expect activity levels to increase and enjoy
growth throughout 2013. Schlumberger expects its international
spending on exploration and production to climb 10% this year.
The company is aiming for continued margin improvement
underpinned by the Middle East/Asia and Europe/CIS/ Africa
regions. Russia and Australia, in particular, are expected to be
sources of strength in the coming quarters.
However, activity weakness in North America, where
Schlumberger has a vast exposure, is likely to depress its share
prices, going forward. Importantly, pricing remained weak during
the recently concluded second quarter. Hydraulic
fracturing-related work continued to face difficulty due to
overcapacity and will likely continue to decline this year.
Moreover, Schlumberger's financial and operational performances
face a number of headwinds.
Other Stocks to Consider
While we prefer to remain on the sidelines for Schlumberger,
Zacks Ranked #1 (Strong Buy) stock -
Range Resources Corp.
Susser Petroleum Partners LP
) - could be good buying options for the short term.
DRIL-QUIP INC (DRQ): Free Stock Analysis
RANGE RESOURCES (RRC): Free Stock Analysis
SCHLUMBERGER LT (SLB): Free Stock Analysis
SUSSER PETRLEUM (SUSP): Free Stock Analysis
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