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Stock Strategist

Schlumberger Set to Benefit From International Recovery

It’s proved it can generate shareholder value in even dismal oil market conditions.


Among oilfield-service companies, Schlumberger (SLB) has long been in a class of its own. Underpinned by its moat and strong management, the company has earned solid economic profits for decades. It reached the front of the pack in wireline evaluation in the 1920s and hasn’t relinquished that position. Since then, Schlumberger has used its unrivaled expertise in understanding oil and gas reservoirs to drive a continuous stream of profits in its legacy business lines and also apply this knowledge to develop other oilfield-service business lines with nearly unwavering success. As an example, the company pioneered directional drilling in the mid-1980s, a technology that today is recognized as an indispensable ingredient in the shale revolution.

Schlumberger is now aiming its expertise in a new direction: lowering the cost per barrel of oil and gas development via the provisioning of integrated, performance-linked services. Management believes that a combination of Schlumberger’s unique technologies along with a new business model embodying full integration and alignment of interests will allow for transformational leaps in oilfield efficiencies and reservoir productivity, and early signs have been positive.

Preston Caldwell does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.