Will Schlumberger Resume Moving Up?

Schlumberger Limited (NYSE:SLB) and its subsidiaries supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide.

SLB operates in three segments: Reservoir Characterization Group, Drilling Group and Reservoir Production Group. In December 2011, SES Holdings Ltd. announced merger of its rig business with Schlumberger Rig Management Group. In May 2012, National Oilwell Varco, Inc. acquired Wilson distribution business segment from Schlumberger Limited.

SLB has a market cap of $99.14 billion. The stock is trading at average levels of forward P/E of 14.59 times. The company is trading at a premium due to its consistent and superior performance.

ASSETS

SLB is fairly liquid at a current and quick ratio of 1.83 and 1.41 respectively. The company is financially stable as current ratio went from 1.67 in 2010 to 1.95 in 2011.

EQUITY

The company has reasonable level of debt as shown by debt to equity of 0.32 and long-term debt to equity of 0.24. SLB manifests good financial health and solid leverage to meet the crucial demands of the industry.

PROFITABILITY

SLB has shown impressive revenue growth of 16.34 percent year over year. Also, EPS growth this year is 3.82 percent while long-term annual growth estimate for EPS is 17.58 percent. SLB is a dividend stock with an annual dividend of $1.10 for the year. Dividend yield is about 1.47 percent.

RECENT NEWS

William Blair began coverage on shares of Schlumberger in a report issued on Tuesday. The firm issued a market perform rating on the stock. Barclays Capital reiterated an overweight rating on shares of Schlumberger in a research note to investors on Thursday, September 6th. Credit Agricole initiated coverage on shares of Schlumberger in a research note to investors on Wednesday, September 5th. They set a buy rating. Finally, analysts at RBC Capital reiterated an outperform rating on shares of Schlumberger in a research note to investors on Tuesday, September 4th.

Shares of Schlumberger traded down 0.83% during mid-day trading on Tuesday, hitting $76.50. Schlumberger has a one year low of $54.79 and a one year high of $80.78.

Norwegian operator Statoil ASA (STO) has issued a letter of intent to Samsung Heavy Industries to construct a new permanent floating storage unit (FSU) for the Heidrun field in the Norwegian Sea. Thexi new storage unit will be a substitute for the esting buoy loading system on the field. The contract estimated at about $230 million and includes options to procure two additional units. Statoil, which recently hired Schlumberger Limited ( SLB ) for electric wireline logging services on the Norwegian Continental Shelf.

Schlumberger NV announced that with reference to an announcement dated July 19, 2012, indicating that its board of directors had declared a quarterly dividend of $0.275 per share of outstanding common stock, payable on October 12, 2012 to stockholders of record at the close of business on September 3, 2012. For clarification, the effective record date for the dividend will be the close of business on August 31, 2012, not September.

RECOMMENDATION

Our option play is:

BUY SLB STOCK (BULL CALL SPREAD)

Sell OCT 19 77.5 CALL FOR $1.05 and BUY OCT 19 75 CALL FOR $2.10 

Target Gain $1.45
Stop Loss $1.05