Why This Schlumberger Analyst Has 'Growing Confidence In An International Inflection'

Schlumberger NV SLB is poised to benefit from rising international demand in the second half of 2021 and growing uncertainty around the regulatory environment for the U.S. oil and gas segment, according to BofA Securities.

The Schlumberger Analyst: Chase Mulvehill upgraded Schlumberger from Neutral to Buy and raised the price target from $27 to $31.

The Schlumberger Thesis: The Biden administration has enacted “a 60-day moratorium on new federal land leases and drilling permits,” Mulvehill said in the upgrade note.

More regulatory scrutiny and higher royalties and taxes could be ahead. This, along with continued U.S. E&P capital discipline, “could temper U.S. drilling and completion activity over the medium-to-long term,” the analyst said.

“Thus, as global oil markets rebalance, it will likely be the INTL markets that will supply the majority of incremental oil production growth in 2022+,” he said, adding that Schlumberger generates more than 80% of its revenue from the international markets.

SLB Price Action: Shares of Schlumberger were down 4.65% at $23.28 at the time of publication Monday.

Photo courtesy of Schlumberger.