KEY POINTS
- SLB reported a 13 percent rise in Q3 profit but warned of slower revenue growth in Q4.
- Reduced customer spending and weak oil prices are impacting the company’s outlook.
- SLB plans to maintain international spending growth, particularly in natural gas projects.
SLB, formerly Schlumberger, reported a 13 percent increase in third-quarter profit, but the company has warned that revenue growth may slow in the fourth quarter as oil producers scale back spending due to weak oil prices.
The cautious outlook pushed SLB shares down by 3.6 percent, affecting rival oilfield service stocks as well.
Spending cuts and market conditions
The largest oilfield services firm in the world, SLB, stated that many producers have adopted a more frugal expenditure strategy as a result of declining oil and gas prices.
During a post-earnings call, CEO Olivier Le Peuch said that discretionary expenditure and customer activity had decreased. Notwithstanding the difficulties, SLB reiterated its goal of attaining an adjusted EBITDA margin of at least 25 percent for the entire year, bolstered by cost-cutting initiatives.
SLB predicts that although North American expenditure will either stay the same or slightly fall in 2025, spending in other markets will expand by low to mid-single digits.
Despite the OPEC+ alliance’s output curbs, the corporation selected natural gas projects in Asia, the Middle East, and the North Sea as prospects for expansion.
Regional revenue and outlook
While international revenue increased by 12 percent year-over-year, this growth was slower compared to the previous three quarters, which had seen an 18 percent increase.
According to Reuters, revenue from North America grew 3 percent sequentially, driven by higher activity in the U.S. Gulf of Mexico, but was offset by reduced drilling on U.S. land.
SLB’s total revenue for the quarter was $9.16 billion, falling short of analysts’ expectations of $9.25 billion. However, net income rose to $1.27 billion, with earnings per share reaching 89 cents, narrowly beating the consensus estimate of 88 cents per share.
Future plans and adjustments
In response to the challenging market conditions, SLB has initiated a cost-cutting program, including reducing resources in North America and centralizing some digital services.
The company also announced the sale of its interests in Canada’s Palliser Block, which is expected to generate $430 million in cash and reduce well-abandonment liabilities.
