Schlumberger 3Q16 Earnings Call Notes

Schlumberger’s (SLB) CEO Paal Kibsgaard on Q3 2016 Results

We have indeed reached the bottom of the cycle

“After seven quarters of unprecedented activity decline, the business environment stabilized as expected in the third quarter, confirming that we have indeed reached the bottom of the cycle.”

Optimism in Argentina

” In Argentina there is clear optimism amongst the industry players that the new government will take the required steps to further encourage E&P investment in the country as they seek to reduce the oil import dependency, which should have a positive impact on E&P investments in 2017.”

Supply and demand of crude is more or less in balance

“Turning now to the oil macro, the supply and demand of crude is now more or less in balance as seen by the flattening global petroleum inventories and the start of consistent growth towards the end of the quarter in particular in North America. In addition, oil demand was again revised upwards in September and is now forecasted to be around 1.2 million barrels per day for both 2016 and 2017. At the same time global supply is plateauing as non-OPEC production continues to experience significant declines and even offsetting record production levels from OPEC in September. ”

The period of oversupply is over

” the period of oversupply and inventory build is over and that market segments should soon change, paving the way for an increase in oil prices and subsequently E&P investments. ”

See a clear path to profitability in drilling

“So in terms of the reason for mobilizing more equipment into the drilling side is clearly that we have a clear path towards profitability. So given the unique technology offering we have and the technical challenges of drilling these very, very long horizontals we are able to get pricing which is going to give us I think ultimately the returns that we’re looking for. And this is why we are prepared to put more capacity into play on the drilling side or what’s going on in West Texas. As I said on the fracturing side, still there is no clear path towards profitability and this is why we are still maintaining presence and basically holding the fort until we believe we can justify putting more capacity into play going forward.”

Recovery in most places around the world and an uptick in investment

“we believe that there is early signs of recovery in most places around the world. If you look at next year for international, we expect solid growth year-over-year in the Middle East and Russia on a full year basis. But we also see, I would say an uptick in investment and activity in Latin America and in Europe, Africa. The only place where we don’t see any signs of recovery at this stage is in Asia.”

Not a big turnaround in exploration yet

“I don’t think there is yet a big turnaround I would say in the exploration market or in the seismic market. But I think we have positioned ourselves very well in both of those markets. “