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Description:
Schlumberger (SLB) is the world's largest provider of oilfield services and equipment, and a a key industry player in terms of technology development and services provision. In terms of market share, SLB outnumbers the competition by a long way in most product lines. The closest competitor has only half of SLB’s earnings. 70% of SLB’s revenues are from international business.

Financially speaking SLB is extremely robust, which allows it to develop both along its secular trends as well as in more difficult regions and wells. The company’s portfolio is well diversified, in terms of products and oil fields served. SLB can rely on high customer loyalty and is able to charge its clients higher average prices due to its excellent track-record in execution and delivery. 

SLB can leverage its substantial capability in R&D, thereby creating a barrier to entry and making it hard for the competition to enter into this market segment; however, to maintain its course in R&D, SLB depends on rather high oil and gas prices. Furthermore as it is heavily reliant on technology, it must make sure that new acquisitions can be well-integrated to ensure they perform up to market expectations.

Strengths and weaknesses analysis:
Strengths:

• In terms of profitability, the company has shown a constant increase since 2011.
• Operating income is well diversified: North America 27%, Latin America 17%, Europe and Africa 27% and MEA 28%.
• The company has a competitive edge over its competitors, as a result of years of heavy spending on R&D (7,000 people working in 25 R&D centers).
• The company has long, close relationships with many of its clients, which helps it win some of the larger industry contracts.
• SLB has an excellent track-record of integrating acquired companies and technologies.

Weaknesses:

• The company is exposed to politically unsafe regions (Middle East, Africa).
• The company has low exposure to the US gas market, hence it may not be able to fully reap the benefits of shale gas development; a rapidly growing sub-sector.
• Given its international exposure, the company could be subject to technology transfer to other countries where new competition may appear.
• More and more, countries are concerned about security generally; a trend which could prove detrimental to SLB, as it provides high-level production optimizing technology at higher prices.

Investment profile and investment opportunity:

Operational risk: Average
Expected sales growth: Average
Investment orientation: Group “Global Strategies” and “Best-in-Class” investment themes (Energy, American Stars)