SLB Schlumberger
Best-in-class oil services franchise, but cyclical; price already assumes ~8% growth the cycle won't reliably deliver.
The business
SLB sells oilfield technology and services (reservoir characterization, drilling, completions, production systems, digital software) to national and international oil companies. Revenue tracks upstream capex, especially international and offshore spending, with a growing digital and subsurface software layer plus the ChampionX production chemicals business.
Quality gate · 69/100
Moat & management
| Moat | narrow moat |
| Source | intangible |
| Trajectory | stable |
| Management | adequate |
SLB has the largest R&D budget in its industry, proprietary downhole technology, and decades of NOC relationships across 100+ countries, which together give it real scale and technology advantages internationally. But customers' capex cycles drive pricing, rivals (Halliburton, Baker Hughes, Chinese firms) compete hard, and the moat protects market share far better than it protects margins through a downturn.
Since the 2020 reset, management has improved margins, cut debt, and returned heavy cash through buybacks and dividends, though the ChampionX deal and a rising share count show acquisition-driven dilution. Capital allocation is disciplined for a cyclical business, but buybacks are timed to cash flow rather than to price.
Owner-earnings inputs
| Owner earnings (TTM) | 3.35B |
| Owner-earnings yield | 4.6% |
| Free-cash-flow yield | 6.3% |
| Growth used (normalized) | 4.5% |
| Market-implied growth (reverse DCF) | 8.5% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 9.0% |
Projected owner earnings
| Yr | Owner earnings | Growth | PV |
|---|---|---|---|
| 1 | 3.51B | 4.5% | 3.22B |
| 2 | 3.66B | 4.3% | 3.08B |
| 3 | 3.81B | 4.2% | 2.94B |
| 4 | 3.96B | 4.0% | 2.81B |
| 5 | 4.11B | 3.8% | 2.67B |
| 6 | 4.27B | 3.7% | 2.54B |
| 7 | 4.41B | 3.5% | 2.42B |
| 8 | 4.56B | 3.3% | 2.29B |
| 9 | 4.71B | 3.2% | 2.17B |
| 10 | 4.85B | 3.0% | 2.05B |
Key risks
- Upstream capex cycle: oil price collapse or OPEC+ supply surge compresses volumes and pricing
- Long-term oil demand peak from energy transition caps the terminal growth runway
- Pricing pressure from NOCs (Saudi Aramco, ADNOC) and lower-cost Chinese service competitors
Catalysts
- Multi-year international and offshore/deepwater spending cycle plus Middle East gas expansion
- Digital, production-recovery and ChampionX synergies lifting through-cycle margins and recurring revenue
⚠ maintenance capex ≈ min(capex, D&A), capped at FCF · Price pays for ~8%/yr owner-earnings growth over 10y (reverse DCF); model credits 4%. · Rich vs our conservative value, but a quality business is not a short — stance is WAIT for a better price, not sell.