Will the Rig Count Affect Schlumberger in 2017?



Schlumberger’s North American revenue

In 4Q16, Schlumberger’s (SLB) revenue share from its North American operations fell to 25%, compared to 27% in 4Q15.

The company has steadily diversified away from North America in the past year, with its international operations contributing 75% of its 4Q16 revenue. In comparison, Halliburton’s’ (HAL) North American revenue rose marginally in 4Q16 compared to 4Q15. Schlumberger makes up 0.55% of the SPDR S&P 500 ETF (SPY).

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US rig count

According to Baker Hughes (BHI), the US rig count fell 6% in 4Q16 over 4Q15. The US rig count reached its multiyear high in September 2014. After that, it fell 61% until February 17, 2017.

However, from December 30, 2016, until the week ended February 17, 2017, the US rig count rose 14% to close at 751. By comparison, the international rig count rose 1% in January 2017 compared to a month earlier. A higher rig count could increase SLB’s revenue and earnings in 1Q17.

Next, we’ll discuss how upstream operators’ capital expenditures affect Schlumberger’s performance.


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