SLB Misses on Q1 Earnings and Revenues Amid Weak Activity

SLB SLB reported first-quarter 2025 earnings of 72 cents per share (excluding charges and credits), which missed the Zacks Consensus Estimate of 74 cents. The bottom line also decreased from the year-ago quarter’s level of 75 cents. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

The oilfield service giant recorded total quarterly revenues of $8.49 billion, which missed the Zacks Consensus Estimate of $8.59 billion. The top line declined from the year-ago quarter’s figure of $8.71 billion.

The weak quarterly results were primarily due to weak drilling activity in Mexico, Saudi Arabia and offshore Africa. Lower evaluation activity also pressured margins across core segments.

SLB Limited Price, Consensus and EPS Surprise

SLB Limited price-consensus-eps-surprise-chart | SLB Limited Quote

Segmental Performance

Revenues in the Digital & Integration unit totaled $1,006 million, up 6% from the year-ago quarter’s level. Pre-tax operating income of $306 million was up 21% year over year. The figure also beat the Zacks Consensus Estimate of $293 million.

The unit's revenues grew year over year, primarily due to greater adoption of digital technologies and higher sales of exploration data, particularly offshore the United States. This increase was partially offset by lower APS revenues due to a temporary pipeline disruption on an APS project in Ecuador.

Revenues in the Reservoir Performance unit decreased 1% year over year to $1.7 billion. Pre-tax operating income totaled $282 million, which decreased 17% year over year. The figure missed the Zacks Consensus Estimate of $335 million. The revenues were supported by higher intervention and simulation activity, offset by lower evaluation revenues. The top line was affected by lower revenues in Saudi Arabia, Russia, West Africa and East Asia, offset by increased activity in the United Arab Emirates and Argentina.

The Well Construction segment’s revenues fell 12% from the year-earlier quarter’s level to $2.98 billion. Pre-tax operating income decreased 15% to $589 million and the Zacks Consensus Estimate for the same was pegged at $586 million. This was due to lower drilling activity in Mexico, Saudi Arabia, U.S. land, India and offshore West Africa, partially mitigated by higher activity across the United Arab Emirates, Kuwait, Argentina, North Africa and China. 

Revenues in the Production Systems segment amounted to $2.94 billion, up 4% from the year-ago quarter’s reported actuals. Pre-tax operating income improved 19% year over year to $475 million, which beat the Zacks Consensus Estimate of $439 million. The segment benefited from strong sales, both in North America and internationally, across most of the portfolio.

Cash Flow & Financials

SLB reported a free cash flow of $103 million in the first quarter.

As of March 31, 2024, the company had approximately $3.89 billion in cash and short-term investments. It registered a long-term debt of $10.53 billion at the end of the quarter.

Outlook

SLB reiterated full-year 2025 capital investment (including capex, exploration data costs and APS investments) guidance of approximately $2.3 billion. The projected figure is lower than the 2024 level of $2.6 billion.

SLB’s Zacks Rank & Stocks to Consider

SLB currently carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector may look at some better-ranked stocks like Archrock Inc. AROC, Kinder Morgan, Inc. KMI and Enterprise Products Partners L.P. EPD. While Archrock presently sports a Zacks Rank #1 (Strong Buy), Kinder Morgan and Enterprise Products carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States with a focus on midstream natural gas compression. AROC provides natural gas contract compression services and generates stable fee-based revenues.

Archrock’s earnings beat estimates in three of the trailing four quarters and met once, delivering an average surprise of 8.81%.

Kinder Morgan is a leading midstream player in North America with a stable and resilient business model, largely driven by take-or-pay contracts, which ensure consistent earnings and facilitate reliable capital returns to shareholders. KMI operates one of the largest natural gas pipeline networks, positioning it to benefit from the projected increase in U.S. natural gas demand by 2030. 

Kinder Morgan’s earnings missed estimates in three of the trailing four quarters and met once, delivering an average negative surprise of 3.33%.

Enterprise generates stable fee-based revenues from its vast network of oil and gas pipelines spanning 50,000 miles, connecting prolific U.S. shale plays. Notably, the acquisition of Pinon Midstream, which aims to provide services in the prolific Permian Basin, is expected to drive the partnership’s cash flows. This move enhances its NGL value chain and addresses regional infrastructure constraints, with strong customer demand expected to boost revenues.

EPD’s earnings beat estimates in two of the trailing four quarters and missed in the other two, delivering an average surprise of 1.83%.

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This article originally published on Zacks Investment Research (zacks.com).

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