Schlumberger Posts Third Straight Loss in Q3 as Oil Rout Hurt Demand

Schlumberger, the world’s leading oilfield services provider, reported a loss for the third consecutive time in the September quarter as a prolonged period of lower crude prices due to COVID-19 disruptions caused clients to suspend drilling activities, sending it shares down about 1% on Friday.

Top oilfield services provider posted a net loss of $82 million, or 6 cents per share, in the July-September quarter. Excluding charges and credits, Schlumberger earned 16 cents per share on aggressive cost-cutting.

Schlumberger said its total revenue slumped 38% to $5.26 billion and revenue from North America declined to $1.16 billion, from $2.85 billion a year earlier.

At the time of writing, Schlumberger shares traded over 1% higher at $15.35 on Friday; the stock is down about 60% so far this year.

Executive comments

“International activity is steady following budgets resets completed in the third quarter,” Chief Executive Officer Olivier Le Peuch said in an earnings release.

“In North America, the conditions are set for continued momentum, with improving DUC well completion activity in US land and a modest drilling resumption in the US and Canada. International activity is steady following the budget resets completed in the third quarter and activity will be affected by the seasonal decline in the Northern Hemisphere, partly offset by muted year-end product and multiclient license sales,” Peuch added.

Schlumberger stock forecast

Fifteen analysts forecast the average price in 12 months at $23.33 with a high forecast of $28.00 and a low forecast of $17.50. The average price target represents a 47.85% increase from the last price of $15.78. From those 15 equity analysts, 11 rated “Buy”, four rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $25 with a high of $30 under a bull scenario and $10 under the worst-case scenario. Cowen and Company raised their stock price forecast to $30 from $29; BMO initiated with outperform rating and gave the price target of $21; Susquehanna lowered their price target to $20 from $24.

Several other analysts have also recently commented on the stock. HSBC raises target price to $19.2 from $18.1 in July. Schlumberger had its price objective lowered by analysts at Scotiabank to $21 from $23. The firm presently has a “sector outperform” rating on the oil and gas company’s stock. Citigroup raised Schlumberger from a “neutral” rating to a “buy” rating and increased their price objective to $26 from $20.

Analyst Comments

“Schlumberger’s (SLB) plan to refocus on its best businesses will likely be accelerated by the impending downturn, which can help it emerge in a far better position that it entered in. Strong position in the more-defensive int’l markets: SLB is heavily focused on the int’l markets, which will be more resilient than NAm (where SLB was already retreating) if upstream capex cuts play out as we expect,” said  Connor Lynagh, equity analyst at Morgan Stanley.

“Dividend cut alleviates liquidity concerns: We now think SLB’s balance sheet is on firm footing – FCF covers dividends through our 2022 forecast horizon, and in what we would view as an extreme case where it could not refinance, it could cover 2020-22 debt maturities with current liquidity.”

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