The Zhitong Finance App learned that the latest financial report of global oil and gas resource exploration and development leader Schlumberger (SLB.US) shows that global energy supply is tight and is strengthening further investment needs to increase oil and gas production and restore production capacity. This logic has begun to be reflected in the month-on-month improvement of the company's main business. On October 23, Brent crude oil once rose to $114.72, a record high of more than five months. The recent intensification of supply-side supply pressure for refined oil products such as diesel and gasoline also involves refineries and transportation bottlenecks. Schlumberger's most direct beneficiary path is strong technical services for oil and gas fields and orders for exploration and development of oilfield equipment formed by customers increasing oil and gas development, resuming production and improving recovery rates.
In the third quarter, Schlumberger's overall revenue data was approximately US$9.449 billion, up 5% month-on-month and 6% year-on-year; adjusted earnings per share (Adjusted EPS) of $0.64 (Adjusted EPS) was $0.64, higher than market expectations of $0.62, and revenue also exceeded the agreed estimate of approximately US$9.27 billion. The company's net profit for the third quarter was US$735 million; adjusted EBITDA (Adjusted EBITDA) of US$2,067 million, a profit margin of 21.9%, an increase of 71 basis points over the previous quarter. However, after the adjustment, EPS still declined 7% year over year, and revenue increased 2% year over year after excluding the impact of the ChampionX acquisition. This report card more accurately points to growth and recovery at the operating level, rather that profits have fully entered high growth.
The increase in production began with stock oil fields, and deepwater orders continued to grow
Production Systems (Production Systems) was Schlumberger's main source of performance growth in the third quarter, with business revenue of about US$4 billion, up 15% year over year; Well Construction (Well Construction) and Reservoir Performance (Reservoir Performance) revenue were $2,888 billion and US$1,634 million respectively, both up 5% month-on-month and down 3% year-on-year. The Middle East business grew 13% month-on-month and still declined 12% year over year. These are all sufficient indications that field operations are resuming, but geopolitical conflicts and war-level disturbances have not completely subsided.
Looking at the technical mechanism, customers can first improve wellbore flow, reduce blockages and production stops, restore existing oil well output through artificial lift (Artificial Lift), production chemicals (Production Chemicals), and oil well intervention (Well Interventions), and then increase medium- to long-term supply through new wells and deep water development. One of Schlumberger's core investment values can be described as transforming underground resources into sustainably delivered oil and gas production and improving customer return on investment through engineering efficiency and equipment reliability. As a result, its growth depends not only on the number of new drills, but also on expenses to maintain, increase production, and extend the life of existing oil fields.
The order has provided concrete support — Saudi Aramco, one of the world's largest oil giants, has awarded Schlumberger four integrated well construction contracts, with plans to deliver more than 450 wells over three years; OneSubsea has been awarded the first phase of an underwater production system contract for RoVuma LNG in Mozambique, covering oil production trees, pipelines, umbilical cord cables and control systems. These projects correspond to the development of production capacity and diversification of natural gas supply in the Middle East, helping to transform energy security needs into a new year's business. Total Energy also signed a 15-year DrillPlan digital well planning agreement, which shows that customers are connecting underground data, engineering design and construction execution, and continue to invest in improving development efficiency.
Orders determine performance growth, and cash cashout determines valuation trajectory
The company's digital business (Digital) business revenue data for the third quarter was approximately US$693 million, up 5% year on year; Data Center Solutions (Data Center Solutions) business revenue was about US$230 million, up 76% year over year, but it accounted for only about 2.4% of the group's revenue. It provides a new source of growth for SLB, which currently remains focused on the oil and gas business. Management's positive judgment on 2027 is mainly based on international deep-water development, diversification of supply, and further recovery in the Middle East.
Cash returns also need to be examined. The company's “shareholder returns increased, but free cash flow coverage of dividends and repurchases declined during the quarter. Operating cash flow for the quarter was US$1,510 million, free cash flow (free cash flow) of US$828 million, while repurchases and cash dividends combined were US$1,095 million; net debt at the end of the period was US$9.249 billion. Seen from this perspective, the next phase of valuation support should come from order conversion, improved profit margins, and increased cash recovery and dividends. If business growth brings about increased equipment utilization and better project execution efficiency, it is more conducive to continuous dividends, repurchases, and balance sheet improvements.
At the level of operating cash flow: From US$1,682 billion in 2025 to US$1,510 billion in 2026, a year-on-year decrease of 10.2%. Free cash flow fell from $1.01 billion to $828 million, a year-on-year decrease of 24.8%. Among them, operating cash flow decreased by US$172 million and capital investment increased by US$101 million, which together resulted in a decrease of free cash flow of US$273 million. Repurchase and cash dividend level — Increased from $517 million to $1,095 million, up 111.8% year over year, mainly repurchases from $114 million to $656 million; cash dividends increased 8.9% year over year from 403 million to $439 million.
The net debt (net debt) level at the end of the period increased from US$9.181 billion to US$9.249 billion, an increase of only 0.7% over the previous year. Schlumberger still generated strong free cash flow, but fell 24.8% year over year, while dividends and repurchases increased to US$1,095 million during the same period. As the company increases shareholder returns, whether order growth can be further transformed into profit and cash flow will affect its ability to balance business investment, continue repurchases, and reduce net debt.
Prior to the earnings report, Citi maintained a “buy” target price of 62 US dollars for Schlumberger, and UBS maintained a “buy” target price of 75 US dollars; based on the closing price of 49.55 US dollars on October 22, this corresponds to a potential increase of about 25.1% and 51.4%, respectively. These are institutional pricing prior to earnings reports. For investors, this performance that exceeded expectations provided evidence of recovery. The next more critical catalyst was production optimization and continuous delivery of deepwater orders, driving profit recovery to catch up with overall revenue data growth and stronger repurchase and dividend paths.