Offshore Oil Activity With Schlumberger And The Future Of Uber's Business Model

Schlumberger - Capturing Offshore Oil & Gas Activity

While global oil consumption has climbed from 92.7 million bbl/day in 2014 to 99.4 million bbl/day in 2022, the picks & shovels providers of the industry have drastically reduced their asset base on the back of the tremendous fracking boom. As fracking technology has allowed U.S. production to go from ~5.2 million bbl/day in 2005 to nearly 13 million bbl/day in 2019, the oversupply of oil didn’t only lead to poor returns for investors but also resulted in substantial capital discipline post-Covid. Schlumberger SLB, Halliburton HAL, Weatherford WFRD, and Transocean RIG invested ~70% less in durable assets than in 2014. Since 2014, these companies’ net property, plant, and equipment base has shrunk by 7% annually from 2014 – 2022. Starved of investment and constrained by investors who demand capital returns over production volume, oil services equipment used to explore, develop and expand projects has become vastly more scarce, making Schlumberger a crucial company in the E&P ecosystem.

Palo Alto Networks - Cybersecurity Trends

Palo Alto Networks PANW offers network capabilities from firewalls to cloud security offerings under the Prisma umbrella. At a 44x NTM P/E, investors pay a premium P/E multiple in exchange for strong secular trends. With an R&D budget 2-5x of pure-play peers, Palo Alto is set to capture increased spending in a market that research firm Gartner expects to grow to $260bn by 2026 (11% annual growth). According to McKinsey, cyberattacks will amount to ~$10.5 trillion/year by 2025 – a 300% increase from 2015. The FBI and the White House are making cybersecurity a national security concern, which ultimately means investors are underwriting a crucial element of western cybersecurity strategy.

Uber - Looking Beyond Ride Hailing

Uber UBER is a business transformation story from a ride-hailing pure play to an all-encompassing transportation ecosystem that touches freight infrastructure, food delivery, and advertising. With more than 2 billion quarterly trips, 5.4 million earners on the Uber platform, and 12 million Uber One members, Uber is increasingly evolving into a more well-rounded business model. In 2019, the lion's share of Uber’s revenue came from mobility services, making up 82% of sales. In 2022, mobility only accounted for 44% of the company’s sales, with delivery at 34% and freight at 22%. Freight was an irrelevant part of the business three years ago at 6% of overall sales. Uber’s role in freight reaches far beyond the company’s service platform that connects transportation services providers; last-mile delivery accounts for 41% of a parcel’s overall supply chain cost and 53% of shipping. Uber’s network effects bode exceptionally well to lower costs and, at the same time, reward network participants. Lastly, network effects are crucial when monetizing more than 100 million mobility users on the platform; the company aims to capture $1bn in advertising revenue by 2024, up from the current $500 million.