The oil industry has plenty of players, from explorers to refiners to completely integrated companies. Below, we will take a look at one company from each of these categories and see where investors should put their money.
Schlumberger Limited. (NYSE:SLB)
reported its second-quarter earnings just recently, and the results were great. In 2Q’13, the company posted revenue of $11.2 billion, up from $10.6 billion last quarter. This revenue expansion came from every segment Schlumberger Limited. (NYSE:SLB) operates in. Schlumberger Limited. (NYSE:SLB) also saw its margins expand.
It instituted a progressive dividend policy that should reward shareholders. And in addition to all of this, Schlumberger Limited. (NYSE:SLB) also authorized a $10 billion repurchase program with an option to increase it in the future.
Schlumberger Limited. (NYSE:SLB) uses its proprietary technology to get more oil out of the ground for less money and has attracted long-term business contracts. Schlumberger Limited. (NYSE:SLB)‘s new business ventures in Iraq and Venezuela should bring in stable revenue from depleted well extraction from at least three years before contract renewal periods are up. Schlumberger also made it clear on its conference call that Venezuela is holding up its end of the contract, and it expects it to be coming in smoothly in the future as well.
Schlumberger currently has a 21.5% gross margin and pays out only 25% of earnings to support a 1.5% dividend yield. The company has room to expand its payout, and given the outlined five year cash flow roadmap, it should continue to do so. CEO Paal Kibsgaard stated that he expects the price of crude oil to remain high, and this should drive more capital to be invested worldwide. He also noted that the company is also experiencing higher revenue per rig. Both of these statements indicate that the company will have growing and stable revenue into the future.
is engaged in producing natural gas liquids and commodity petrochemicals from oil.
As we see American production of oil coming back, Phillips should benefit from the current disconnect between American gasoline prices and the world market prices. Americans are driving fewer miles per year, and the efficiency of vehicles sold in this country continues to increase. This has led to a drop in demand in the American market, making it more profitable to sell refined gasoline to other markets, most notably Europe. This may not give consumers relief at the pump, but it will give Phillips 66 a boost to earnings.