Sunday, January 29, 2012

Schlumberger (SLB) 2012 Review

Schlumberger (SLB) is the world’s leading oilfield service company providing wireline, drilling and measurement and well testing services, completion, artificial lift, data and consulting services, land and marine seismic services and reservoir services.

Schlumberger has grown profits at a 16% pace over the past ten years; the dividend growth rate has been lower rate but management has stated that it intends to increase it in the near term. In addition, the company has earned a 11-25%+ return of equity over the last ten years. While the company experienced lower earnings in 2009, SLB profits resumed their up trend in 2011 and should continue to grow at an above average over the long term as a result of:

(1) its financial strength and technological leadership positions it to benefit from increased activity in oilfield services and simulation and completion services,

(2) exploration and Production activities are ahead of projection in the US, Canada, French Guyana, NW Africa, East Africa and Norway,

(3) the growth in global demand for deep water services.


(1) intense competition causing pricing and margin pressures,

(2) commodity price and currency fluctuations,

(3) geopolitical risks,

(4) adverse weather conditions can negatively impact demand.

Schlumberger is rated A++ by Value Line, carries a debt to equity ratio of about 22%, and its stock yields of approximately 1.4%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
SLB 1.4% 9% 21% 6
IND 1.7 6 18 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
SLB 22% 20% 2 15% A++
IND 23 17 NA 13 NA


Note: SLB stock price recovered well off the March 2009 low, quickly surpassing the down trend off its June 2008 high (straight red line) and the November trading high (green line). Long term, the stock is in an up trend; the straight blue line is the upper boundary of that up trend. In late 2011, the up trend off the March 2009 was broken and the stock re-set to a trading range (purple lines). On a very short term basis, SLB is in a down trend (brown line). The wiggly red line is the 50 day moving average. The Dividend Growth Portfolio owns a full position in SLB; and the Aggressive Growth Portfolio owns a 75% position. The upper boundary of the stocks Buy Value Range is $35; the lower boundary of its Sell Half Range is $101.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.