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Could the US Rig Count affect Schlumberger in 2Q17?

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US rig count

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Revenue by geography

In 1Q17, Schlumberger’s revenue share from North America rose to 28% from 25% in 4Q16. Schlumberger’s revenue from international operations was 72% in 1Q17. Between 4Q16 and 1Q17, SLB’s aggregate revenue fell 3%.

In comparison, Weatherford International’s (WFT) 1Q17 revenue fell 1% from 4Q16. Nabors Industries’ (NBR) revenue rose 4%, while Superior Energy Services’ (SPN) revenue rose 13%. Schlumberger makes up only 0.37% of the iShares Russell 3000 ETF (IWV), and 0.45% of the SPDR S&P 500 ETF (SPY). SPY tracks the yield performance and price of the S&P 500 (SPX-INDEX). The index has risen 16% in the past year, whereas Schlumberger has fallen 14%.

Did upstream companies’ capex affect Schlumberger’s margin?

Between 4Q16 and 1Q17, 19 of the best-known upstream companies slashed their capex by 21% in aggregate. During the same period, Schlumberger’s EBITDA[1.earnings before interest, tax, depreciation, and amortization] margin (or EBITDA as a percentage of revenue) improved marginally to 22% from 21%. Lower upstream capex typically results in lower prices for OFS (oilfield services and equipment) companies’ services and products, which weakens their operating revenue and margins. Next, we’ll discuss Schlumberger’s growth drivers in 1Q17.

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