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Schlumberger's Operations in Ecuador Face Financial Crunch

Zacks Equity Research

Schlumberger Limited SLB has stated that Ecuador's government has failed to accede with a payment agreement of $350 million, which was a portion of $850-million debt.

The operations of the largest oilfield service player in the Andean nation is hampered. In November, Ecuador had agreed to discharge its debt with the oil company in tranches but failed to fulfill its obligation. Petroamazonas, a state oil company, was supposed to make the payment.

Earlier, Petroamazonas had paid the debt in installments following a series of postponement. However, it decided to pay the remaining amount in November, from funds raised via issuance of bonds in the international market.

The recent volatility in oil prices has raised liquidity problems for Ecuador. The government is contemplating over various sources to raise funds in order to cover payments to international and local contractors.

Even the analysts are of the view that the delay in the fulfillment of the payment may further complicate Schlumberger’s operations in the region.

Schlumberger is the operator of a consortium in the Shushufindi field. Currently, the field produces 60,400 barrels per day.The company intends to invest about $2 billion from 2018 onwards, in order to boost production.

Investors should know that the company’s lucrative international operations are appreciable. Being the leading provider of technology for complex oilfield projects, Schlumberger is better positioned than most of its peers to undertake new offshore projects in the shallow water basins outside North America.

Price Movement

The company’s shares have declined 2.3% compared with the industry’s rally of 2.3% in the last three months.



Zacks Rank & Other Key Picks

Houston, TX-based Schlumberger currently carries a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector include Braskem SA BAK, ConocoPhillips COP and Northern Oil and Gas Inc NOG. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The largest petrochemical operator in Latin America, Braskem, delivered a positive earnings surprise of 68.54% in the preceding quarter.

ConocoPhillips, based in Houston, TX, is a major global exploration and production (E&P) company. It delivered an average positive earnings surprise of 152.34% in the last four quarters.

Northern Oil and Gas, based in Minnetonka, MN, is an independent energy company. The company delivered an earnings surprise of 100.00% in the preceding quarter.

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Schlumberger N.V. (SLB) : Free Stock Analysis Report
 
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