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SLB & HAL Q3 Earnings Review: International Operations Strong

By Zacks Investment ResearchOct 21, 2019 10:34PM ET
SLB & HAL Q3 Earnings Review: International Operations Strong
By Zacks Investment Research   |  Oct 21, 2019 10:34PM ET
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Lower drilling and fracking activities as well as conservative capital spending by explorers have slowed down onshore North American crude production in third-quarter 2019.

Despite this, Schlumberger (NYSE:SLB) — the world’s largest oilfield service player — has managed to beat the Zacks Consensus Estimate for third-quarter earnings, while another oilfield service major Halliburton (NYSE:HAL) met estimates. Significant exposure to profitable international markets that include Latin America, Europe, Africa, Middle East and Asia, helped the oilfield service giants make up for the weak North American operations.

International Activities Aid Q3 Earnings

In the September quarter of 2019, there has been significant year-over-year improvement in drilling operations in the oil and natural gas plays of international markets. Per data provided by Baker Hughes Company (PS:BKR) , the total count of oil and gas drilling rigs in the months of July, August and September of 2019, was 1162, 1138 and 1131, respectively. In the year-ago months, the tallies were recorded at 997, 1008 and 1004, respectively.

Since oilfield service firms assist explorers and drillers in setting up oil and gas wells, the ramp-up in international drilling operations has contributed to the companies’ third-quarter earnings.

Schlumberger’s major business segments — Reservoir Characterization, Drilling and Production — were majorly driven by a pickup in international activities. The company reported third-quarter 2019 earnings of 43 cents per share (excluding charges and credits), beating the Zacks Consensus Estimate of 40 cents, thanks to higher wireline activities in Russia and Australia along with contributions from international drilling operations.

Smaller rival Halliburton reported that improved Eastern Hemisphere drilling operations have aided its Drilling and Evaluation segment in the third quarter. A surge in cementing jobs in the Eastern Hemisphere contributed to Halliburton’s Completion and Production business performance.

Meanwhile, a couple of oilfield service companies that are likely to beat estimates are Core Laboratories (NYSE:CLB) and TechnipFMC plc (NYSE:FTI) .

Our proven model predicts an earnings beat for Core Laboratories and TechnipFMC this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Based in Amsterdam, the Netherlands, Core Laboratories is scheduled to report third-quarter 2019 earnings on Oct 23, after the closing bell. The company has an Earnings ESP of +0.69% and a Zacks Rank #3.

The other leading firm is TechnipFMC, headquartered in London, the U.K. The company, scheduled to report third-quarter earnings on Oct 23, has an Earnings ESP of +6.28% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Growth Outside North America Will Continue to be Robust

Lately, there has been an increase in the number of final investment decision (FID) approvals for new E&P projects in markets outside North America. With the count of drilling rigs in international plays steadily rising, Schlumberger expects a 7% to 8% increase in project spending by explorers in this area this year. Thus, more international oilfield service contracts await the company.

Meanwhile, Halliburton anticipates international revenue growth of a high single-digit rate in 2019. The company expects customers to revive spending in multiple regions outside North America.

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Zacks Investment Research
SLB & HAL Q3 Earnings Review: International Operations Strong
SLB & HAL Q3 Earnings Review: International Operations Strong

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