SLB slides as oil explorers expected to slow spending growth

SLB (NYSE:SLB) -3.8% in Friday’s trading after edging past consensus Q3 adjusted earnings estimates but warning of weak spending by international oil explorers as customers exercise caution in an environment of lower commodity prices.

Q3 net income edged higher to $1.19B, or $0.83/share, from $1.12B, or $0.78/share, in the year-earlier quarter, while revenues rose 10% to $9.16B.

By segment, Q3 revenues in well construction fell 3.4% to $3.31B, production systems surged 31% to $3.1B, reservoir performance increased 8.5% to $1.82B, and digital and integration added 10.8% to $1.09B.

Weak oil and gas prices have caused “a cautionary approach to activity and discretionary spend by many customers,” CEO Olivier Le Peuch said on SLB’s (SLB) earnings conference call.

However, the company reiterated its expectation to deliver full-year adjusted EBITDA margin at or above 25%, partly helped by cost cutting.

In 2025, SLB (SLB) foresees international market spending increasing at a low to mid-single digit percentage rate, while North American spending should come in flat to slightly down.

SLB (SLB), which amasses ~80% of its revenues from overseas markets, said Q3 international revenue rose 12% Y/Y to $7.42B, helped by increased sales in Saudi Arabia, the UAE, Iraq and Kuwait, as well as in North Africa, compared to an 18% Y/Y increase during the previous three quarters.

Q3 North America revenues rose 3% to $1.68B due to higher activity in the U.S. Gulf of Mexico.

The company also said its just-announced sale of its interests in the Palliser Block in Alberta, Canada, will generate ~$430M in cash proceeds and reduce well-abandonment liabilities.