Schlumberger Limited (SLB) Bundle
Understanding Schlumberger Limited (SLB) Revenue Streams
Understanding Schlumberger Limited’s Revenue Streams
Schlumberger Limited generates its revenue primarily through four major business segments: Digital & Integration, Reservoir Performance, Well Construction, and Production Systems. Each of these segments contributes significantly to the overall financial performance of the company.
Revenue Breakdown by Segment
| Segment | Q3 2024 Revenue (in millions) | Q2 2024 Revenue (in millions) | Year-over-Year Growth (%) |
|---|---|---|---|
| Digital & Integration | $1,088 | $1,050 | 4% |
| Reservoir Performance | $1,823 | $1,819 | 0% |
| Well Construction | $3,312 | $3,411 | -3% |
| Production Systems | $3,103 | $3,025 | 3% |
Year-over-Year Revenue Growth Rate
For the first nine months of 2024, total revenue reached $27.0 billion, marking a 12% increase compared to $24.1 billion in the same period of 2023. This growth was driven by various factors across different segments, particularly the acquisition of the Aker Solutions subsea business, which accounted for approximately 50% of the year-on-year increase.
Contribution of Different Business Segments to Overall Revenue
The revenue contributions from each segment for the first nine months of 2024 are outlined below:
| Segment | Revenue (in millions) | Year-over-Year Change (%) |
|---|---|---|
| Digital & Integration | $3,091 | 10% |
| Reservoir Performance | $5,368 | 11% |
| Well Construction | $10,090 | 0% |
| Production Systems | $8,946 | 30% |
Geographic Revenue Distribution
Revenue distribution by geographic area for Q3 2024 is as follows:
| Region | Revenue (in millions) | Year-over-Year Change (%) |
|---|---|---|
| North America | $1,687 | 2.7% |
| Latin America | $1,689 | 0.5% |
| Europe & Africa | $2,434 | 16.4% |
| Middle East & Asia | $3,302 | 16.1% |
| Other | $47 | -11.3% |
Significant Changes in Revenue Streams
In Q3 2024, the Digital & Integration segment saw a sequential revenue increase of 4%, driven by higher digital revenue and increased adoption of cloud, AI, and edge technologies. In contrast, the Well Construction segment experienced a 3% decline in revenue due to lower drilling activity, particularly in Latin America and US land. The Production Systems segment reported a 3% increase in revenue, primarily from higher sales of surface production systems and completions.
Overall, the financial performance across the segments indicates a mixed but generally positive trend, with some segments experiencing growth while others face challenges due to market conditions.
A Deep Dive into Schlumberger Limited (SLB) Profitability
Profitability Metrics
Understanding the profitability metrics of a company is essential for investors looking to gauge financial health and operational efficiency. Below is a detailed analysis of key profitability metrics for Schlumberger Limited (SLB) as of 2024.
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, SLB reported the following financial results:
| Metric | Amount (in millions) | Margin (%) |
|---|---|---|
| Revenue | $27,005 | |
| Gross Profit | $5,404 | 20.0% |
| Operating Profit | $4,655 | 17.3% |
| Net Profit | $3,366 | 12.5% |
The gross profit margin of 20.0% indicates effective cost management, while the operating profit margin of 17.3% reflects strong operational efficiency. The net profit margin of 12.5% demonstrates the company's ability to convert revenue into actual profit.
Trends in Profitability Over Time
Comparing the nine months of 2024 to the same period in 2023, the following trends can be observed:
| Year | Revenue (in millions) | Net Profit (in millions) | Net Profit Margin (%) |
|---|---|---|---|
| 2024 | $27,005 | $3,366 | 12.5% |
| 2023 | $24,145 | $3,091 | 12.8% |
The revenue increased by 12% year-on-year, while the net profit margin slightly decreased from 12.8% to 12.5%. This indicates a need to monitor cost structures closely as revenue grows.
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, SLB's profitability ratios stand out:
| Metric | SLB (%) | Industry Average (%) |
|---|---|---|
| Gross Profit Margin | 20.0% | 18.5% |
| Operating Profit Margin | 17.3% | 15.0% |
| Net Profit Margin | 12.5% | 10.0% |
SLB outperforms the industry averages in all profitability metrics, indicating a competitive advantage in managing costs and maintaining profitability.
Analysis of Operational Efficiency
Operational efficiency can be analyzed through cost management and gross margin trends:
- Research & Engineering Expenses as a percentage of Revenue: 2.1% (2024) vs. 2.2% (2023)
- General & Administrative Expenses as a percentage of Revenue: 1.1% (2024) vs. 1.1% (2023)
This consistency in expense management supports the company's ability to maintain stable profitability margins despite fluctuations in revenue.
As of September 30, 2024, SLB's operational efficiency remains strong, with a focus on cost optimization and improved pricing strategies in international markets, yielding significant contributions to overall profitability.
Debt vs. Equity: How Schlumberger Limited (SLB) Finances Its Growth
Debt vs. Equity: How Schlumberger Limited Finances Its Growth
As of September 30, 2024, Schlumberger Limited reported a long-term debt of $11.864 billion and short-term borrowings amounting to $1.059 billion, resulting in a total gross debt of $12.923 billion.
The company’s debt-to-equity ratio stands at 0.55, which is lower than the industry average of approximately 0.75, indicating a more conservative approach to leveraging its capital structure.
In the second quarter of 2024, Schlumberger issued $1.5 billion in new senior notes, comprising $500 million of 5.00% Senior Notes due 2027, $500 million of 5.00% Senior Notes due 2029, and $500 million of 5.00% Senior Notes due 2034.
The company has maintained a solid credit rating, with a Moody’s rating of Baa2 and a Standard & Poor’s rating of BBB, reflecting its stable outlook and manageable debt levels.
Schlumberger balances its growth financing strategy through a mix of debt and equity. The recent $1.236 billion spent on share repurchases in the first nine months of 2024 indicates a strong commitment to returning value to shareholders while managing its debt levels effectively.
| Debt Type | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| 5.00% Senior Notes | $500 | 5.00% | 2027 |
| 5.00% Senior Notes | $500 | 5.00% | 2029 |
| 5.00% Senior Notes | $500 | 5.00% | 2034 |
| 3.90% Senior Notes | $1,476 | 3.90% | 2028 |
| 2.65% Senior Notes | $1,250 | 2.65% | 2030 |
| 1.375% Guaranteed Notes | $1,113 | 1.375% | 2026 |
| 2.00% Guaranteed Notes | $1,107 | 2.00% | 2032 |
| 0.25% Notes | $1,002 | 0.25% | 2027 |
| 0.50% Notes | $1,000 | 0.50% | 2031 |
| Total Long-Term Debt | $11,864 | - | - |
Assessing Schlumberger Limited (SLB) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 30, 2024, is calculated as follows:
- Current Assets: Cash ($3,086 million) + Short-term Investments ($1,376 million) + Other Current Assets = Total Current Assets
- Current Liabilities: Short-term Borrowings ($1,059 million) + Current Portion of Long-term Debt + Other Current Liabilities = Total Current Liabilities
The exact current and quick ratios are:
- Current Ratio: 3.01
- Quick Ratio: 2.37
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, shows a positive trend:
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| Sept 30, 2024 | $8,442 | $3,794 | $4,648 |
| Sept 30, 2023 | $7,735 | $4,176 | $3,559 |
Cash Flow Statements Overview
Cash flow from operations for the nine months ended September 30, 2024, is detailed below:
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Cash Flow from Operating Activities | $4,212 | $3,615 |
| Cash Flow from Investing Activities | ($2,668) | ($2,263) |
| Cash Flow from Financing Activities | ($1,341) | ($503) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the liquidity position remains strong with:
- Cash and Cash Equivalents: $3,086 million
- Short-term Investments: $1,376 million
- Net Debt: $8,461 million (Net debt calculated as total debt minus cash and short-term investments)
Overall, the company is positioned well to meet its short-term obligations without significant liquidity concerns, reflecting a robust operational cash flow.
Is Schlumberger Limited (SLB) Overvalued or Undervalued?
Valuation Analysis
To assess the financial health of the company, we will explore key valuation metrics, stock performance, and analyst opinions for 2024.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 15.4, calculated based on a trailing twelve months (TTM) earnings per share (EPS) of $2.34 for 2024.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 2.2, based on a book value per share of approximately $27.57.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated at 10.8, with an enterprise value of $93.56 billion and EBITDA of $8.64 billion.
Stock Price Trends
Over the last 12 months, the stock price has experienced fluctuations, starting at around $39.00 per share and reaching a peak of $49.00 before settling at approximately $46.00.
Dividend Yield and Payout Ratio
The current dividend yield is 2.4%, with a quarterly dividend of $0.275 per share. The payout ratio is approximately 35% based on TTM earnings.
Analyst Consensus
The analyst consensus rating is a Buy, with a target price averaging around $50.00, indicating potential upside from the current price levels.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 15.4 |
| P/B Ratio | 2.2 |
| EV/EBITDA Ratio | 10.8 |
| Current Stock Price | $46.00 |
| Dividend Yield | 2.4% |
| Quarterly Dividend | $0.275 |
| Payout Ratio | 35% |
| Analyst Consensus | Buy |
| Target Price | $50.00 |
Key Risks Facing Schlumberger Limited (SLB)
Key Risks Facing Schlumberger Limited
Schlumberger Limited faces a variety of internal and external risks that could impact its financial health and operational effectiveness. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The oilfield services industry is highly competitive, with numerous companies vying for market share. Schlumberger competes with firms like Halliburton and Baker Hughes, which can exert pressure on pricing and service offerings. In the first nine months of 2024, Schlumberger reported revenue of $27.0 billion, a 12% increase year-on-year, yet this growth is challenged by aggressive pricing strategies from competitors.
Regulatory Changes
Schlumberger operates in multiple jurisdictions, each with its own regulatory environment. Changes in environmental regulations can lead to increased costs and operational delays. For instance, the company's capital investments were $1.9 billion during both the first nine months of 2024 and 2023, which reflects the need to comply with evolving regulations.
Market Conditions
The company’s performance is highly sensitive to oil and gas prices. Lower commodity prices can lead to reduced spending by customers. In the third quarter of 2024, Schlumberger's revenue from North America was $4.9 billion, down 3% from the previous year, primarily due to lower drilling activity.
Operational Risks
Operational risks include the potential for project delays and cost overruns. In 2024, the company recorded charges related to workforce reductions amounting to $111 million in the second quarter and $65 million in the third quarter. Such operational challenges could negatively affect profitability and operational efficiency.
Financial Risks
Financial risks stem from the company's debt levels and interest expense. As of September 30, 2024, Schlumberger's long-term debt stood at $11.9 billion, with an interest expense of $136 million for the third quarter. This debt burden can limit financial flexibility and increase vulnerability to interest rate fluctuations.
Strategic Risks
Strategic risks include the company's ability to adapt to changing market dynamics. For instance, the acquisition of Aker Solutions in late 2023 was a strategic move to enhance capabilities in subsea services. However, integration challenges can pose risks, as seen in the $1.1 billion in dividends paid during the first nine months of 2024.
Mitigation Strategies
To mitigate these risks, Schlumberger has employed several strategies:
- Cost Optimization: The company has focused on reducing operational costs, achieving a 36% operating margin in digital services.
- Geographic Diversification: By maintaining a presence in various regions, Schlumberger can offset declines in specific markets. For instance, revenue from the Middle East & Asia grew by 16% year-on-year.
- Innovation and Technology: Increased investment in digital technologies aims to enhance service offerings and operational efficiency, contributing to a 10% year-on-year growth in digital revenue.
Financial Overview
| Metrics | 2024 (9 Months) | 2023 (9 Months) |
|---|---|---|
| Revenue | $27.0 billion | $24.1 billion |
| Long-term Debt | $11.9 billion | $10.8 billion |
| Dividends Paid | $1.1 billion | $961 million |
| Capital Investments | $1.9 billion | $1.9 billion |
Future Growth Prospects for Schlumberger Limited (SLB)
Future Growth Prospects for Schlumberger Limited
Analysis of Key Growth Drivers
Schlumberger Limited is poised for growth through several strategic initiatives. The company has focused on product innovations, particularly in digital solutions and carbon capture technologies. In 2024, the company reported a digital revenue growth of 10% year-on-year, achieving $3.1 billion in Digital & Integration revenue.
Future Revenue Growth Projections and Earnings Estimates
For the full year 2024, Schlumberger anticipates revenues to reach approximately $36 billion, reflecting a projected year-on-year increase of 12%. Earnings per share (EPS) for the nine months ended September 30, 2024, were reported at $2.36, compared to $2.17 for the same period in 2023.
Strategic Initiatives or Partnerships Driving Future Growth
In 2024, Schlumberger entered into a joint venture with Aker Carbon Capture ASA, investing $0.4 billion to accelerate carbon capture adoption. This partnership is expected to enhance the company's capabilities in industrial decarbonization and expand its market share in the growing carbon capture sector.
Competitive Advantages Positioning the Company for Growth
Schlumberger's competitive edge lies in its extensive global footprint and technological expertise. The company reported a total backlog of $5.2 billion as of September 30, 2024, with approximately 60% expected to be recognized as revenue over the next 12 months. This solid backlog underlines the strong demand for its services and products across various markets.
| Segment | Revenue (Q3 2024) | Year-on-Year Growth (%) | Operating Margin (%) |
|---|---|---|---|
| Digital & Integration | $1.1 billion | 10% | 31% |
| Reservoir Performance | $1.8 billion | 11% | 20% |
| Well Construction | $3.3 billion | Flat | 21% |
| Production Systems | $3.1 billion | 30% | 16% |
In summary, Schlumberger's focus on digital innovations, strategic partnerships, and its robust market position suggest substantial growth opportunities ahead. The company is well-prepared to leverage its strengths to navigate the evolving energy landscape.
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Article updated on 8 Nov 2024
Resources:
- Schlumberger Limited (SLB) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Schlumberger Limited (SLB)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Schlumberger Limited (SLB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.