Schlumberger Limited. (SLB), Halliburton Company (HAL): Growth In Oil Services

The debt-to-equity ratio for Schlumberger is 31 and the company has a total cash position of approximately $5.6 billion. Schlumberger Limited. (NYSE:SLB) also maintains a healthy current ratio of about 1.9. With EPS expected to grow at an average annual rate of 17% over the next five years and the stock trading at PEG (five year expected) of 0.9, I believe the stock offers a huge potential upside.

A word on Halliburton and Baker Hughes

Halliburton Company (NYSE:HAL) generates the highest percentage of its revenue through North American rig services at around 56%. This is followed by rig services in Europe and Africa at around 15%. Rig services from Latin America, the Middle East and Asia contribute approximately 28% to overall revenue.

It has market cap of $39 billion, and according to Trefis rig services in North America account for approximately 66% of Halliburton’s stock price. This is indicative of Halliburton Company (NYSE:HAL)’s dependence on the North American region.

Similarly, Baker Hughes Incorporated (NYSE:BHI) also generates the highest percentage of its revenue through rig services in North America at around 51%. This is followed by rig services in the Middle East and Europe at around 15% and 17%, respectively.

The remaining portion of its revenue is generated through rig services in Latin America. According to Trefis stock-price estimates, rig services in North America account for 51% of Baker Hughes’s stock price.

In contrast, rig services in North America account for 29% of Schlumberger Limited. (NYSE:SLB)’s overall stock price. This is indicative of Halliburton Company (NYSE:HAL) and Baker Hughes’ higher dependence on the North American region.

What should investors Remember?

Schlumberger is levered to fundamental growth drivers in the oil-services industry. Furthermore, the company’s international portfolio can lead to higher revenue growth and margin expansion compared to other US oil-services companies (international E&P investments exceed those in North America.) I believe Schlumberger Limited. (NYSE:SLB)’s strong fundamentals and attractive valuation offer credible potential upside and stable returns.

The article Benefits of Investing in Oil Services originally appeared on and is written by Kiran Gulati.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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