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Fundamental analysis: SCHLUMBERGER (#SLB)

Schlumberger Limited provides reservoir characterization, drilling, production and processing technology to the oil and gas industry around the world. It operates in four divisions: Digital & Integration, Reservoir Performance, Well Construction and Production Systems.

The company has recently published the results of Q2 2021: the results have been very positive and there has been strong growth both in all geographical areas and in all sectors in which Schlumberger operates.

The analysts' estimates remain bullish confirming the buy rating: the average target price is at $ 36.00 with a maximum of $ 46.00

⚡️Growth factors:

  • The company's revenues are well diversified. Schlumberger #SLB offers a full range of oil services. The main services are the construction and maintenance of oil wells. The company also provides digital solutions used in the calculation of technical parameters for drilling, oil production and refining. In addition, the company provides consulting services on the optimization of oil production.

  • Strong margins and good free cash flow noted from Q2 2021 results, allow the management to confirm growth forecasts and approve the $ 0.125 per share dividend

  • Global revenues increased + 8%, the highest growth rate since Q2 2017. Specifically North America + 11%, Latin America + 2%, Europe / CIS / Africa + 2% and Middle East / Asia + 4%.

  • Despite concerns about the Delta variant, Schlumberger's estimates already herald a broader reopening of the economy. In this scenario, continuous growth is expected, especially in the international division.

📖 Financial indicators:

  • Global Earnings: $ 5.6bn (+ 8%), $ 1.1bn from North America and $ from international markets

  • Free Cash Flow: $ 869m in line with expectations for the year

  • Short-Term Liabilities: SLB's short-term assets ($ 12.1 billion) outweigh its short-term liabilities ($ 8.8 billion)

  • Long-Term Liabilities: SLB's short-term assets ($ 12.1 billion) do not cover its long-term liabilities ($ 19.1 billion)

  • Debt level: SLB's debt / equity ratio (120.4%) is considered high.

  • Debt Reduction: SLB's debt-to-equity ratio has increased from 50.4% to 120.4% over the past 5 years.

  • Debt coverage: SLB's debt is not well covered by operating cash flow (19.1%).

  • Interest coverage: SLB's interest payments on its debt are well covered by EBIT (3.9x coverage)

Entry range $ 26.00- $ 28.00

Target $ 36.00

Stop loss $ 23.00

OTB Global Investments

24 August 2021

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