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What Does Schlumberger’s Net Debt-to-Equity Ratio Suggest?

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SLB’s net debt

On March 31, 2018, Schlumberger’s (SLB) net debt was $13.9 billion, 20% higher than its net debt of $11.6 billion on March 31, 2017. Although SLB’s total debt had fallen 5% as of March 31, 2018, compared to March 31, 2017, its cash and marketable securities had fallen more sharply—by 43%—during the same period.

Shareholders’ equity

Schlumberger’s shareholders’ equity decreased 9% in Q1 2018 compared to Q1 2017.

SLB’s net debt-to-equity

The effect of higher net debt and lower shareholders’ equity meant that SLB’s net debt-to-equity ratio increased to 0.38x in Q1 2018 from 0.29x in Q1 2017. SLB’s net debt-to-equity ratio largely increased in the five quarters leading up to Q1 2018, but the rise was not sharp or alarming.

Some oilfield equipment and services companies that saw an increasing net debt-to-equity ratio trend from March 31, 2017, to March 31, 2018, were Core Laboratories (CLB), Patterson-UTI Energy (PTEN), and Nabors Industries (NBR). CLB’s net debt-to-equity ratio increased from 1.37x in Q1 2017 to 1.5x in Q1 2018. PTEN’s net debt-to-equity ratio increased from 0.05x in Q1 2017 to 0.21x in Q1 2018. NBR’s net debt-to-equity ratio increased from 1.08x in Q1 2017 to 1.43x in Q1 2018.

SLB makes up 14.9% of the iShares US Oil Equipment & Services ETF (IEZ). IEZ tracks an index composed of US equities in the oil equipment and services sector. In the past year, IEZ has risen 5% compared to the 1% fall in SLB. Read Market Realist’s comprehensive analysis of Schlumberger in Schlumberger’s Stock Price after First-Quarter Earnings.

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