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US Equity | Energy

Schlumberger Is Well-Positioned for Global Energy Rebound

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A new positive cycle for the long beleaguered oil field services industry could release the pent-up value in Schlumberger () based on the firm's ramping up of production and exploration internationally, analysts said Friday .

Paige Marcus, an analyst for CFRA Research, said a positive sign for SLB is that oil producers increased their exploration and production budgets by 12% in 2018, a number that should accelerate even higher next year.

The increase in production and exploration should allow SLB to gradually dictate higher prices, Marcus said.

"In the macro that is good news for all of these guys," Marcus said. "They are also mobilizing a lot of their fleet and drilling rigs to where the demand is and they wouldn't do that without increased demand internationally."

On Friday , Schlumberger reported second-quarter revenue of $8.3 billion, compared to first-quarter 2018 revenue of $7.8 billion, results that were largely in line with Wall Street projections. Those results brought SLB's first half-year revenue to $16.1 billion, compared to $15 billion for the first half of 2017.

By comparison, Halliburton Co. () , which has a much larger North American presence than SLB, has projected first half earnings of $11.6 billion. The company is preparing to release its earnings before the market opens on Monday . Halliburton reported $5.7 billion in revenue in the first quarter of 2018.

About half of Halliburton's oil fields business revenues are in North America, according to FactSet, compared to 25% for Schlumberger, though SLB is looking to grab market share domestically, analysts said.

SLB's North American revenue associated with hydro-fracking brought in $2.5 billion in the second quarter, 12% higher than $2.2 billion in the first quarter and 46% higher than the $1.7 billion in the second quarter of 2017.

"There are a lot of new upstart companies that SLB can provide better service quality than," said James West, senior managing director of Evercore ISI and its director of oil fields research.

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