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Analyzing Schlumberger's Earnings prior to Its 1Q17 Results

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Part 5
Analyzing Schlumberger's Earnings prior to Its 1Q17 Results PART 5 OF 9

Will the US Rig Count Affect Schlumberger in 1Q17?

US rig count

From December 30, 2016, to the week ended March 31, 2017, the US rig count rose ~25% to close at 824. A higher US rig count could increase Schlumberger’s (SLB) revenue and earnings in 1Q17. Crude oil’s price has fallen 5% since December 30. Despite crude oil’s lower price, the US rig count has continued to surge.

In 1Q17, the US rig count rose ~83% compared to 1Q16. The count reached its multiyear high in September 2014. Since then, it’s fallen 57% as of March 31, 2017.

Will the US Rig Count Affect Schlumberger in 1Q17?

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Revenue by geography

In 4Q16, Schlumberger’s revenue share from North America rose. In the quarter, SLB’s North American revenue share was 25%, compared to 24% in 3Q16. Schlumberger’s revenue from international operations was 75% in 4Q16. During the same period, SLB’s aggregate revenue rose 1.2%.

Revenue comparison with peers

Tidewater’s (TDW) 4Q16 revenue fell 10% over 3Q16. National Oilwell Varco’s (NOV) revenue rose 3%, while Superior Energy Services’ (SPN) revenue rose 9% from 3Q16 to 4Q16. SLB makes up just 0.45% of the iShares Russell 3000 ETF (IWV). The energy sector makes up 6.1% of IWV.

SLB also makes up 0.55% of the SPDR S&P 500 ETF (SPY). SPY tracks the price and yield performances of the S&P 500 Index (SPX-INDEX). The energy sector makes up 6.6% of the S&P 500.

Next, we’ll discuss Schlumberger’s 4Q16 growth drivers.

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