Schlumberger Limited (SLB) remains one of the stronger oil and gas service companies despite pressures stemming from falling commodity prices and geopolitical disruptions around the world, says Edward C. Muztafago, Director of Investment Research at Societe Generale.
“The sanctions in Russia have been rather problematic, some of the areas of disruption in the Middle East — but all in all, if you look at Schlumberger’s business, they continue to perform quite well, and particularly in markets like the offshore Gulf of Mexico, where you are starting to see a bit of a return to the development of lower tertiary work, which is very service-intensive,” Muztafago said.
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The falling price of oil is expected to slow spending down, but as exploration activity decreases by the part of oil and gas E&Ps, SLB is expected to pull through thanks to its limited exposure to that segment.
“The one area where Schlumberger is seeing some weakness certainly is in the seismic business, and one that is driven by the pullback in exploration activity. Seismic for Schlumberger has become a reasonably small part of their revenue stream, probably about 7% by our estimates. The confusion that some people have had that seismic is going to be a tangible headwind on Schlumberger I think is a little bit of a false read,” Muztafago said.
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