Schlumberger (SLB) Q4 Earnings & Revenues Beat Estimates

Schlumberger Limited SLB has announced fourth-quarter 2021 earnings of 41 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 39 cents. The bottom line significantly increased from the year-ago quarter’s earnings of 22 cents.

The oilfield service giant recorded total revenues of $6,225 million, outpacing the Zacks Consensus Estimate of $6,094 million. The top line also improved 12.5% from the year-ago quarter’s $5,532 million.

The strong quarterly earnings resulted from higher contributions from Europe/CIS/Africa, strong North America rig activity and increased well construction activities in the U.S. Gulf of Mexico.

Segmental Performance

Revenues in the Digital & Integration unit totaled $889 million, up 7% from the year-ago quarter’s levels. Pre-tax operating income of $335 million was up 25% year over year. The outperformance resulted from higher contributions from Europe/CIS/Africa, and increased sales in offshore North America and the Permian. The positives were partially offset by lower contributions from the Asset Performance Solutions (APS) projects.

Revenues in the Reservoir Performance unit increased 3% year over year to $1,287 million. Pre-tax operating income was $200 million, surging 111% year over year. The upside in profit was led by a surge in stimulation activities in the Middle East & Asiaalong with higher intervention activities across the international offshore markets, particularly in the U.K. and Latin America.

Revenues in the Well Construction segment rose 28% from the year-earlier quarter’s level to $2,388 million. Pre-tax operating income improved 101% year over year to $368 million. Strong North America rig activities and increased well construction activities in the U.S. Gulf of Mexicoaided the segment.

Revenues in the Production Systems segment amounted to $1,765 million, up 7% from the year-ago quarter’s numbers. Pre-tax operating income rose 3% from the prior-year quarter’s levels to $159 million. Increased revenues in subsea, well production, and midstream production systems were responsible for the improvements. This was offset partially by a decline in revenues in surface production systems.

Cash Flow

Despite the company’s $22 million of severance payments through the December-end quarter, the oilfield service firm generated a free cash flow of $1.3 billion.

Financials

Capital expenditure in the quarter was $447 million. As of Dec 31, 2021, the company had approximately $3,139 million in cash and short-term investments. It had long-term debt of $13,286 million at the end of the fourth quarter, representing a debt to capitalization of 48.2%.

Forward View

For 2022, Schlumberger projects a capital investment of $1.9-$2 billion.  Last year, the figure was $1.7 billion.

Fuel demand has improved drastically, so has oil price, owing to the roll-out of coronavirus vaccines at a massive scale. The company expects the trend to continue for the next few years, which will drive upstream investment, especially in international resources. Being a leading player in the oilfield service space, the company expects to capitalize on the improving demand for oilfield services.

Zacks Rank & Stock to Consider

The company currently carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector might look at the following companies that presently flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BP plc BP, based in London, the U.K., is a fully integrated energy company, with a strong focus on renewable energy. BP has a strong portfolio of upstream projects, which has been backing impressive production growth.

BP announced that before declaring results for the December-end quarter, it has intended to execute an additional $1.25 billion of share repurchases. The company continues to anticipate buying back $1 billion worth of shares by every quarter, considering Brent crude price at $60 per barrel. On the dividend front, the company projects a hike in the annual dividend per ordinary share of 4% through 2025.

Royal Dutch Shell plc (RDS.A) is a fully integrated energy company, as it participates in every aspect related to energy, from oil production to refining and marketing. As of 2020 end, Shell likely had proved reserves of 9.1 billion oil-equivalent barrels.

The BG acquisition has made Shell the largest liquefied natural gas (or LNG) producer in the world. With LNG demand likely to rise significantly in the near-to-medium term, Shell’s position as a major supplier of LNG should help meet the fuel’s growing demand and improve the cash flow.

Eni SPA E is among the leading integrated energy players in the world. Its upstream operations involve the exploitation and production of oil and natural gas resources. Through midstream activities, the company transports and stores hydrocarbons. Eni also engages in refining hydrocarbons and distributing the end products in 71 nations. Apart from providing natural gas, the company generates and sells electricity.

Eni currently has a Zacks Style score of A for Momentum, and B for Value and Growth. Eni beat the Zacks Consensus Estimate three times in the last four quarters and missed once, with an earnings surprise of 0.43%, on average.

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