The group's activity is concentrated around four distinct sectors: well development and construction (35.9% of revenues), sale of oil production equipment and systems (27.8%), sale of solutions and services for optimizing reservoir performance and yield (23.4%) and sale of technological and geophysical solutions and services (12.9%). The group's revenues are divided 23% in North America, 36% in Middle East and Asia, 25% in Europe and Africa and 1'% in Latin America. 

Before we start looking at the business in more details, let’s define our methodology, and why it is a complex task to evaluate such a business:
 
Assessing the profitability of the business at different oil and gas prices is a good way to value an oil company which operates mainly in the upstream business. We could run a model of the type: value of the group = value of its inventories + resources in the ground x difficulty in extracting them. By the way, the extraction assets are worth nothing, but are essential to get a hold of what we are valuing: the inventories. 
 
However, it is very complicated to use this formula accurately for the resources in the ground and the difficulty associated with extraction. Schlumberger's inventory has been evaluated at $3.968 billion - 21.64% increase year-over-year-, but this data is easily quantifiable. Whereas the amount of oil available today is estimated at 45 years, but can be reduced according to global consumption. Extraction is also fluctuating depending on technological advances.
 
In addition to technological challenges, there is an environmental one. The major oil and gas companies are the best placed to finance and operate the energy transition because they are the only ones with the necessary resources to finance these mega-projects. 
 
They are also adjusting to the new paradigm, regulating their model accordingly and aiming to decarbonize operations to be carbon neutral by 2050. To do this, Schlumberger is working to reduce its carbon footprint and GHGs and is also investing in new energy technologies: hydrogen, lithium, energy storage, carbon capture and sequestration (CCS), geothermal energy and geo-energy for heating and cooling buildings. 
 
A company at the cutting edge of technology
 
Schlumberger is using technological innovations and the development of artificial intelligence to optimize industrial performance and production. Schlumberger has teamed up with Aveva (global industrial software publishers) to improve the performance of drilling sites.  Ultimately, the two companies aim to integrate, sell and support joint technologies, as well as a go-to-market business that includes Aveva's PI System data management platform and the AI and IoT applications provided by Schlumberger's Agora offering, the DELFI cognitive E&P environment. It's a collaborative technology that brings the E&P lifecycle together in the cloud seamlessly connecting people, data, and advanced software applications across exploration, development, drilling, production, and midstream. 
 
Schlumberger is investing heavily in this technology through their technology centers, where the latest advances in sensors, electronics, robotics, modeling, and prototyping. These IioT (Industrial Internet of Things) technologies enable the delivery of highly innovative, reliable, and secure products with superior operational efficiency and performance. Using state-of-the-art technology, a solid digital foundation, big data and user experience, E&P solutions ensure process automation and performance optimization based on the environment and geography of each site. 
 
At the same time, the DELFI environment is based, according to Schlumberger, on four fundamental criteria to ensure quality: security, collaboration, openness and cognitive. Data protection is the priority and is supported by cloud provider security, operational procedures and audits. The DELFI environment provides a common space for teams to work together regardless of role, workflow or physical location. Openness and scalability allow for sharing and integrating new partners. With AI and analytics, it enables the full spectrum of cognitive technologies available, providing a unique personalized experience. 
 
 
Schlumberger has expanded its digital drilling planning and operations through the acquisition of Independent Data Services (IDS). It enables exploration and production operators and drilling contractors to analyze and report their operational performance and provides the knowledge to enhance it. Compared to some companies in the sector that grow organically, thus limiting the risk of integration, Schlumberger ensures its growth through various acquisitions to gain significant market share and maintain its leadership position. 
 
Strong results
 
The company's margins are very good, with 12.2% operating margin and 8.20% net margin compared to one of its main competitors Baker Hughes Company where operating and net margins are 7.67% and -1.07% respectively. Its profitability is also high with an ROE of 13.5% and an ROA of 4.61%. The share price is 22.7 times the company's revenue.

Between 2015 and 2021, the price of oil was low, forcing the major groups to limit production and their exploration and development efforts to cushion the blow, as downstream activities were not enough to compensate for losses in upstream activities. This complicated period did not allow companies like Schlumberger to grow, but rather to maintain their support. If we look at the chart, we can clearly see ups and downs without really stalling or exploding.
 
However, we can note a very nice rebound of the company, which since the beginning of the pandemic in 2020, has seen its market cap increase by 71%. In comparison, one of its main competitors: Halliburton Company saw an increase of 60% over the same period, but remains 10% lower. And Schlumberger saw its EBITDA increase by 43% compared to 25% for Baker-Hughes Company over the same period (2020-2022). This growth is part of a very good management and an aggressive expansion policy. 
 
Schlumberger can enjoy excellent analyst coverage with forecasts generally to the upside. The company's net debt is expected to fall by 60% between 2021 and 2024, compared with 53% for Baker-Hughes. On the other hand, the company's free cash flow increased by 110% between 2020 and 2021 and is expected to increase again by 33% by 2023. This situation allows the company to position itself for new acquisitions and develop new projects. 
 
Some investors, such as Warren Buffet, don't like companies that provide dividend, because they believe the money could instead be reinjected into growth. Others love it. With Schlumberger, dividend lovers will be satisfied! They increased by 22% between 2021 and 2022. This could be compared to Halliburton's 110% increase between 2021 and 2022, without forgetting to mention that despite this increase, the amount of dividends will remain lower than those of 2019, which were down by 75% over the period 2019-2021.
 
Overall, Schlumberger is a company with rather solid fundamentals, with a slight advantage over its direct competitors. However, margins remain fragile because they are highly dependent on the price of oil. Sales of oil production equipment and systems follow the cyclicality of the market. (the company was for example in loss in 2016, 2017, 2019 and 2020). Despite the lack of visibility, we shouldn't avoid the whole sector completely either. There may be opportunities at current prices for seasoned and reactive investors.