Schlumberger Limited. (SLB): What It’s Saying About the Energy Industry

Page 1 of 2

Oil-field services company, Schlumberger Limited. (NYSE:SLB)‘s large size and global presence means that it really has a read on the pulse of the global energy industry. When Schlumberger Limited. (NYSE:SLB) executives speak, it’s a good idea for investors to listen closely because the company can provide important industry insights. With that in mind, I’d like to point your attention to a couple of important quotes from the company’s first-quarter conference call.

Schlumberger Limited (NYSE:SLB)Into the deep
Leading off the call was CFO Simon Ayat. He went through the company’s financial numbers and in doing so he made one point that really stood out. He said, “Drilling Group revenue of $4.1 billion increased 9.2%, and margins improved by 57 basis points to 17.9%. These improvements were led by drilling and measurements on strong offshore drilling activity across all international areas and the U.S. Gulf of Mexico.” I’d like to draw your attention to the second part of his statement where he notes that the company saw “strong offshore drilling activity.”

Offshore drilling has been a key growth area for the energy industry, so its an important area to watch to make sure that trend isn’t showing any signs of reversing. The good news is that while last year was the best year ever for deepwater discoveries, 2013 is shaping up to be just as good, if not better. Already this year ConocoPhillips (NYSE:COP) has announced two major discoveries in the Gulf of Mexico which the company views as an important future growth driver. Overall the Gulf of Mexico remains one of the biggest story lines as the industry has truly recovered from the BP disaster.

However, the Gulf isn’t the only area of offshore growth. Anadarko Petroleum Corporation (NYSE:APC) is one of the many companies having a great year. It is partnered with ConocoPhillips (NYSE:COP) on one of those major Gulf of Mexico discoveries; in addition to enjoying the success of that massive find the company announced a major natural gas find off the coast of Mozambique, as well as non-commercial oil off the coast of Kenya. The company plans to keep drilling in Kenya because it was still encouraged by the results. Overall, the industry as a whole is showing no signs of slowing down as these discoveries will continue to drive the strong performance we are seeing in companies like Schlumberger Limited. (NYSE:SLB).

Land ahoy
While offshore drilling has been a very profitable venture for both oil companies and oil-field service providers, it’s not the only driver of profits these days. CEO Paal Kibsgaard led off his remarks on the call by saying: “Our first quarter results were solid, driven primarily by the overall strength and progress of our international business, but also by continued margin resilience in North America, in spite of both activity and pricing challenges.” It’s that margin resilience in North America that’s most interesting to hear.

We know that exploration and production companies are getting much more efficient in drilling wells. Drillers like Continental Resources, Inc. (NYSE:CLR) are drilling more wells per pad, which is lowering completed well cost and is saving both time and money. For example, the company saved $7.5 million and 73 days by drilling a six-well pad compared to drilling six single wells. The company is one of many in the industry to move to multi-well pads; Continental Resources, Inc. (NYSE:CLR) is looking to drill four to eight wells per zone in the future because of this savings. The trend is to use fewer rigs to drill more wells, so oil-field service companies need to manage operations more closely in order to keep margins intact, which is exactly what Schlumberger Limited. (NYSE:SLB) is doing.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!