Here's Why Investors Should Steer Clear of Schlumberger (SLB)
Schlumberger Limited SLB seems to have lost its sheen to the coronavirus-induced weak global energy demand. The oilfield service giant has witnessed downward earnings estimate revisions in the past 30 days from $1.59 to 94 cents per share, indicating a year-over-year earnings decline of 36.1% for 2020.
The coronavirus pandemic has dented worldwide energy demand, leading crude oil to continue trading in the bearish territory. Due to this, the explorers and producers are cutting their 2020 capital budget and restring operating activities. Cimarex Energy Co. XEC, Pioneer Natural Resources Company PXD and EOG Resources Inc. EOG are among the upstream firms that are reducing capital budgets. Thus, with lower spending by explorers, there would be reduced demand for oilfield services, since oilfield service players assist drillers in efficiently setting up oil and gas wells.
Foreseeing second-quarter 2020, Schlumberger stated that there will be a significant decline in the count of onshore rigs in North America. Completion activities will also decline in the region. In fact, the oilfield service company projects North American onshore rig tally to touch 2016 trough levels in the second quarter.
In the international market as well, there will be a reduction in some activities in the second quarter, per Schlumberger. In other words, lower spending by customers owing to the pandemic — which could affect field crews — will hurt the company’s international operations.
A slowdown in customers’ upstream businesses in both North American and international markets is likely to hurt the bottom line of Schlumberger – which carries a Zacks Rank #5 (Strong Sell).
Schlumberger Limited Price and EPS Surprise
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