Why Schlumberger NV (NYSE: SLB) stock is under pressure

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Schlumberger NV (NYSE: SLB) stock lost over 1.1% on 27th July, 2020 (as of 12:30 pm GMT-4; Source: Google finance). For the second quarter of 2020, the firm’s Worldwide revenue lost 28% sequentially to $5.4 billion while International revenue fell 19% sequentially to $4.1 billion. North America revenue fell 48% sequentially hurt by land revenue decreasing 60% due to fall in customers spending. International markets were hurt by Latin America and African markets hurt by revenue pressure on the back of COVID-19-related restrictions and fall in deep-water activity. Moreover, there was a production interruption in Asset Performance Solutions (APS) projects in Ecuador due to a major land slide leading to the rupture of the main pipeline. “As per the segment performance, revenue for Reservoir Characterization and Drilling lost 20% and 24%, respectively on a sequential basis hurt by North America land activity and COVID-19 disruptions in many international GeoMarkets. Production revenue fell 40% on a sequential basis hurt by the precipitous drop in OneStim® pressure-pumping activity. Cameron segment revenue lost 19% on a sequential basis hurt by Surface Systems and Valves & Process Systems.

The firm’s operating margins were hurt by variable costs and the decision to accelerate the restructure of the company. International business margins were flat sequentially, hurt by major revenue contraction and heavy disruption in Ecuador. The firm continues its North American market restructuring by heavily cutting fixed and infrastructure costs. They already shutdown over 150 of facilities and continue to make progress on the technology access franchise. The firm’s drilling remote operations expanded over 25% during the quarter to exceed two-thirds of the drilling activity. The group have drilled 1,250 wells during the second quarter supported by more than 250 remote operations engineers.

Management expects the group’s total revenue to be flat sequentially on a global basis, while expects flat- to low-single-digit decline in North America. The firm reported $1 billion of severance, while the remaining charges are largely non-cash. Going forward, the firm expects a decline in depreciation and amortization expense of over $80 million on a quarterly basis due to impact of charges, while lease expense is expected to be cut by $25 million.

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