Schlumberger (SLB) Has Technology, Diversity to be Solid Oil Services Play - Barron's
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Though crude prices have come off highs for the year, that may change heading into the summer travel season, when more Americans begin moving about to "get away from it all," at least for the weekend.
With Chevron (NYSE: CVX), ExxonMobil (NYSE: XOM), ConocoPhilips (NYSE: COP) and others vying for precious drilling spots, the companies usually turn to Schlumberger (NYSE: SLB) to provide services and technology to assist in the drilling and extraction of oil from deep under the sea.
According to Barron's, about 75 percent of Schlumberger's revenue comes from overseas, providing it with a more diverse customer base than peers Halliburtion (NYSE: HAL) and Baker Hughes (NYSE BHI), both of which focus more on North America. Some speculate 23 percent of sales will come from the Middle East, 27 percent from Europe, Africa, and Russia, 17 percent in Latin America, and 33 percent from North America.
Schlumberger is also a tech leader, which may give it an edge as companies look to more and more challenging environments to extract crude.
A relatively expensive valuation might send investors scurrying away, but Barron's notes the company's technology, scale, and market penetration justifies a premium valuation. Some still expect Schlumberger to tack-on an additional 30 percent though 2011. One analysts suggests Schlumberger will generate as much revenue in Asia in 2011 as the next three competitors combined.
With a dividend that was recently raised to $1.00 per year and cash which may be used toward the buyback of its common, many believe shares are still being held back by turmoil in the Middle East.
However, Saudi Armico said it plans to ramp up production 30 percent from current levels, which may prompt other publicly-traded companies to begin acceleration of their own projects.
Some risk lies in political uncertainty, say some analysts. But Schlumberger has plenty of experience in that arena, and should be able to successfully navigate many challenges that it faces moving forward.
Barron's continues to believe those seeking a play on the oil sector would do well to take a look at Schlumberger.
Schlumberger shares are up about 0.5 percent to $85.36 Friday morning.
With Chevron (NYSE: CVX), ExxonMobil (NYSE: XOM), ConocoPhilips (NYSE: COP) and others vying for precious drilling spots, the companies usually turn to Schlumberger (NYSE: SLB) to provide services and technology to assist in the drilling and extraction of oil from deep under the sea.
According to Barron's, about 75 percent of Schlumberger's revenue comes from overseas, providing it with a more diverse customer base than peers Halliburtion (NYSE: HAL) and Baker Hughes (NYSE BHI), both of which focus more on North America. Some speculate 23 percent of sales will come from the Middle East, 27 percent from Europe, Africa, and Russia, 17 percent in Latin America, and 33 percent from North America.
Schlumberger is also a tech leader, which may give it an edge as companies look to more and more challenging environments to extract crude.
A relatively expensive valuation might send investors scurrying away, but Barron's notes the company's technology, scale, and market penetration justifies a premium valuation. Some still expect Schlumberger to tack-on an additional 30 percent though 2011. One analysts suggests Schlumberger will generate as much revenue in Asia in 2011 as the next three competitors combined.
With a dividend that was recently raised to $1.00 per year and cash which may be used toward the buyback of its common, many believe shares are still being held back by turmoil in the Middle East.
However, Saudi Armico said it plans to ramp up production 30 percent from current levels, which may prompt other publicly-traded companies to begin acceleration of their own projects.
Some risk lies in political uncertainty, say some analysts. But Schlumberger has plenty of experience in that arena, and should be able to successfully navigate many challenges that it faces moving forward.
Barron's continues to believe those seeking a play on the oil sector would do well to take a look at Schlumberger.
Schlumberger shares are up about 0.5 percent to $85.36 Friday morning.
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