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Schlumberger to Kick-Off Oil Service Q1 Earnings: What's Next?

Nilanjan Banerjee
Baker Hughes' (BHGE) better-than-expected earnings in first-quarter 2019 are backed by higher order volume in the Subsea Production Systems business.

Schlumberger Limited SLB will be the first oil service firm to release earnings for the March quarter of 2019 tomorrow. The release will give investors a brief idea of how the other energy companies might fare this earnings season.

Halliburton Company HAL is set to report next week, offering more clarity.

About Oilfield Service Business

The oilfield service players offer technologies to oil and natural gas drillers for efficient drilling and setting up of wells. Among the services offered are manufacturing and mending of equipment that are utilized for extracting crude from wells.

Notably, drillers are specializing in horizontal or angled drilling since explorers and producers are not finding it profitable to employ vertical drilling techniques to many wells. It is the responsibility of oilfield service firms to help explorers drill horizontal wells more efficiently.

Overall, the fate of all oil service firms is positively correlated to crude prices and also to the capital investment decisions of drillers.

Q1 Oil Prices Favorable, Conservative Spending Hurts

The recovery in oil price (roughly 30% for West Texas Intermediate crude) through the March quarter of 2019 is likely to influence results for all oilfield service giants. Tightening of crude supplies, thanks to production cut by the OPEC, and a favorable global economy back the commodity’s record first-quarter gain.

The general theory of economics is that favorable oil price encourages explorers and producers to ramp up upstream operations, which may result in more Q1 contracts for oil service firms. This time around, the scenario was different for the March quarter of 2019.

Explorers and producers kick-started 2019 with a conservative capital budget as they witnessed massive crude downturn during the fourth quarter of 2018. Moreover, explorers are more bothered about bottom-line growth — being forced by investors following years of dull returns —than oil and gas production. Hence, conservative spending by explorers and producers is likely to hurt demand for oil service firms despite favorable crude price in Q1.

What to Expect From Oil Service Giants?

We are employing our proprietary quantitative model to analyze earnings previews of oil service giants. The model signifies that a company should have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of beating estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Based in Houston, TX,Schlumberger Limited is scheduled to report first-quarter 2019 earnings on Apr 18, before the opening bell. 

Our proven model shows that Schlumberger is likely to beat estimates. This is because it has the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). (Read more Can Schlumberger Beat Estimates This Earnings Season?)

Our proven model does not indicate an earnings beat for Halliburton Company — scheduled to report Q1 earnings on Apr 22, before the opening bell. This is because the Houston, TX-based oilfield service firm has an Earnings ESP of -0.82% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.  

The quantitative model also shows slim chances of a beat for Baker Hughes, a GE company BHGE, which is set to report Q1 earnings on Apr 30, before the opening bell. This is because the firm carries a Zacks Rank #3 and an Earnings ESP of -8.94%.

Weatherford International plc WFT, headquartered in Baar, Switzerland, is unlikely to beat the Zacks Consensus Estimate when it will announce Q1 results onMay 8. The oilfield service player carries a Zacks Rank #3 and an Earnings ESP of -11.11%.

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Weatherford International PLC (WFT) : Free Stock Analysis Report
 
Schlumberger Limited (SLB) : Free Stock Analysis Report
 
Halliburton Company (HAL) : Free Stock Analysis Report
 
Baker Hughes, a GE company (BHGE) : Free Stock Analysis Report
 
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