SLB Schlumberger
Best-in-class oilfield services franchise at a cyclical trough; fair value hinges on margins recovering to 18%.
The story
SLB is the largest and most technologically advanced oilfield services company, with a moat built on proprietary reservoir, drilling and digital technology, global scale, and deep national-oil-company relationships, especially in the Middle East. It is a mature, cyclical business. Upstream spending has softened, and margins fell from about 17% to about 12-14% reported, partly from restructuring and ChampionX integration charges. Growth over the long run should track global E&P capex, with some extra from digital, production chemicals and international and offshore mix.
Margins recover to about 18%. That is close to SLB's 2023-24 margins with one-off charges stripped out, plus ChampionX synergies, but not a peak-cycle level. Sales-to-capital of 1.3 sits above the TTM 0.96 because the TTM figure is inflated by acquisition goodwill, while incremental growth in an asset-light, digital-heavy mix needs less capital. Growth is mid-single-digit for 7 years, with terminal growth of 3%, below the risk-free rate, because this is a mature cyclical business with no long franchise runway.
Value drivers
| Revenue growth (Y1) | 4.0% |
| Terminal growth | 3.0% |
| Forecast horizon | 7y |
| Target operating margin | 18.0% |
| Years to target margin | 3 |
| Sales-to-capital | 1.30 |
| Beta | 1.10 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 9.5% |
| Terminal WACC | 9.1% |
Valuation bridge
| PV of explicit FCFF | 22.81B |
| PV of terminal value | 40.97B |
| Equity value | 53.46B |
| ÷ shares → per share | $36.02 |
News
bullish +0.40 · 8 articles
- Sector Update: Energy Stocks Rise Late Afternoon
- Sector Update: Energy Stocks Rise Thursday Afternoon
- Sector Update: Energy Stocks Rise Premarket Thursday
- SLB Wins Oman Contract, Strengthening Its Middle East Growth Story
- Do New SLB (SLB) Digital Wins Clarify Its Long‑Term Competitive Edge in Energy Services?
- SLB (SLB) Could Be 16% Undervalued After Brazil Seismic Survey Launch
- SLB (SLB) Started A Major 3D Seismic Survey Off Brazil
- Halliburton and SLB Are 2 Energy Stocks Riding the Oilfield Recovery. 1 Is Clearly the Better Buy.
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 37.82B | 4.0% | 14.1% | 4.30B | 1.12B | 3.18B | 2.90B |
| 2 | 39.27B | 3.8% | 16.1% | 5.07B | 1.12B | 3.96B | 3.30B |
| 3 | 40.71B | 3.7% | 18.0% | 5.89B | 1.11B | 4.79B | 3.65B |
| 4 | 42.14B | 3.5% | 18.0% | 6.10B | 1.10B | 5.00B | 3.48B |
| 5 | 43.54B | 3.3% | 18.0% | 6.30B | 1.08B | 5.22B | 3.32B |
| 6 | 44.92B | 3.2% | 18.0% | 6.50B | 1.06B | 5.44B | 3.16B |
| 7 | 46.27B | 3.0% | 18.0% | 6.70B | 1.04B | 5.66B | 3.00B |
Key risks
- A longer or deeper cut in upstream capex if oil prices fall on OPEC+ supply increases
- ChampionX integration shortfalls and margin pressure from pricing competition in North America
- Long-term energy-transition decline in hydrocarbon investment, plus geopolitical exposure in the Middle East and Russia
Catalysts
- Middle East and offshore contract wins (e.g., Oman) that lift international activity and margin mix
- ChampionX cost synergies and growth in digital/data revenue that return reported margins above 17%