Schlumberger falls despite chunky dividend hike, strong forecast

By Geoffrey Smith 

Investing.com -- Schlumberger (NYSE:SLB) stock rose in early trading on Friday in New York, but quickly ran into profit-taking despite the oilfield services giant forecasting another strong year.

By 10:40 ET (15:40 GMT), Schlumberger stock was down 0.6%, compared to a 0.5% rise for the S&P 500. The stock has nearly doubled since the end of 2021.

Schlumberger said its key oil and gas markets have entered a "distinct new phase" of expansion, as the world's biggest producers ramp up capacity to cope with a likely strong rebound in oil demand in the aftermath of the pandemic.

China's recent abandonment of its Zero COVID policy, in particular, has been responsible for some large upgrades to global demand this year: the International Energy Agency earlier this week said it expected the global oil market to swing from a surplus of 1 million barrels a day currently to a deficit of nearly 2.5M b/d by the end of the year as Chinese demand ramps up.

Such tailwinds drove Schlumberger's earnings per share to 74c in the final quarter of the year, up 17% from the previous quarter and 76% from a year earlier, with demand in the Middle East booming and profit margins in North America widening significantly. 

Chief executive Oliver Le Peuch said in the Middle East in particular, the group had seen a "significant inflection" in business: revenue increased "in the solid teens" in percentage terms from the previous quarter in Saudi Arabia, Iraq, and the United Arab Emirates, who are among the few countries outside the U.S. that are currently in a position to increase their output quickly.

"We expect record levels of investment by national oil companies to continue in the next few years," Le Peuch said, seeing it as part of a long-term upward trend for the industry.

"We believe that the macro backdrop and market fundamentals that underpin a strong multi-year upcycle for energy remain very compelling," Le Peuch.

As a result, Schlumberger raised its quarterly dividend by another 43% to 25c a share, the second chunky increase in its payouts this year after a 40% increase earlier. Schlumberger also resumed its stock buyback program earlier this month.

The group managed to reduce debt despite cash flow falling below $1B in the final quarter of the year due to its own heavy ongoing capital spending, Le Peuch said.