At the Barclays CEO Energy-Power Conference on Wednesday, Olivier Le Peuch, CEO of oilfield services company Schlumberger Ltd. (NYSE: SLB), outlined the company’s strategy going forward. Put simply, that strategy is to drive down costs through digitization and shedding non-performing businesses, and thereby drive up returns.
Investors reacted positively to Le Peuch’s presentation, of course, especially the bit where he said that “all our future investments will be evaluated through the lens of return on capital rather than growth.”
Le Peuch also announced aggressive margin improvements in both its international and North American segments. The company is targeting a 500 basis point improvement in its international margins and the restoration of double-digit margins in its North American segment, up from current margins in the mid-single-digit range.
Along with rationalizing the company’s portfolio, making more disciplined investments and optimizing the use of working capital, Le Peuch said that margin growth “will allow us to achieve a target of double-digit free cash flow margins” and eventually will “lead to returns above our cost of capital.” He also promised to maintain the company’s dividend at its current level of $2.00 per share, a yield of 6.33% at Wednesday’s closing share price.
Where former CEO Paal Kibsgaard had pursued a strategy of acquiring a wide range of assets and capabilities, Le Peuch noted that Schlumberger is “committing not to take equity positions in oil and gas assets” and to focus on the company’s strength in the digitization of oil and gas exploration and development. Kibsgaard already had begun to shop stakes in assets located in Argentina and Canada as a response to slipping demand for crude.
Without going into specifics, Le Peuch also said that current market valuations and the implementation of the new strategy mean that Schlumberger will take noncash impairment charges related to goodwill, intangible assets and fixed assets when it reports third-quarter results.
Investors generally liked what they heard, pushing the share price up nearly 4% on Wednesday and another 2.5% early Thursday to $33.80, in a 52-week range of $31.03 to $63.65. The 12-month consensus price target on the stock is $48.39.
Is Your Money Earning the Best Possible Rate? (Sponsor)
Let’s face it: If your money is just sitting in a checking account, you’re losing value every single day. With most checking accounts offering little to no interest, the cash you worked so hard to save is gradually being eroded by inflation.
However, by moving that money into a high-yield savings account, you can put your cash to work, growing steadily with little to no effort on your part. In just a few clicks, you can set up a high-yield savings account and start earning interest immediately.
There are plenty of reputable banks and online platforms that offer competitive rates, and many of them come with zero fees and no minimum balance requirements. Click here to see if you’re earning the best possible rate on your money!
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
