Schlumberger’s management’s views on North America
Schlumberger’s (SLB) management expects its capital spending in the North American onshore market to improve in 2017. In the company’s 4Q16 earnings press release, its chair and CEO, Paal Kibsgaard, said, “E&P spending surveys currently indicate that 2017 NAM E&P investments will increase by around 30%, led by the Permian basin, which should lead to both higher activity and a long overdue recovery in service industry pricing.”
SLB makes up 7.4% of the iShares US Energy ETF (IYE). The oil and gas equipment and services sector makes up 15.6% of IYE.
Is recovery in sight?
Schlumberger estimates that that investment in energy drilling and production may not recover until 2017’s end. It could even be delayed until 2018 based on the current demand-supply situation.
In SLB’s 4Q16 earnings call, Kibsgaard said, “Activity levels in key market segments such as exploration and deep water are at record lows and although we do not expect a dramatic short term recovery the trends can only be positive from this point on.” Read more about the future at Schlumberger in Market Realist’s Stumbling Blocks Could Be on the Horizon for Schlumberger.
Schlumberger’s view on international markets
Schlumberger’s earnings contributions from key international markets such as Mexico, Venezuela, Brazil, Sub-Saharan Africa, China, and Russia have collectively fallen more than 70% from 4Q14 to 4Q16, representing a huge potential upside as international recovery starts to unfold.
SLB 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 rig count and Schlumberger’s North American revenue.