Morgan Stanley Sees Upside for Schlumberger & Nabors Amid Russia Risk

In a report published Monday, Morgan Stanley analyst Ole Slorer showed increased conviction in

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Slorer estimates a 15 percent EPS CAGR on Schlumberger ahead of earnings, setting industry growth expectations at 6 percent. On Analyst Day, the company guided 17 to 20 percent in EPS CAGR. Morgan Stanley commented that tech leadership and operating efficiencies will drive superior growth for Schlumberger. Slorer sees strong free cash flow driving an upside to shares to as much as $200.00.

The analyst reported that Nabors Industries' restructuring story will likely drive an upside. Morgan Stanley wrote, "NBR took a large step in its restructuring effort, merging its pressure pumping and well servicing business with CJES for cash and stock, which will allow it to (i) become a focused land driller, and (ii) lower its net debt/cap from 34% to 28%."

Slorer remarked that Russian sanctions are "unlikely" to impact the firm's coverage. The analyst concluded, "The US is calling for sanctions restricting exports of oil industry technology to Russia. We see little risk to our companies, as (i) names with most exposure to Russia (SLB, WFT, TCW) are not US based, (ii) US based companies (HAL, BHI, NOV) already have facilities and technology in-country, while sanctions would only apply to new technology shipments into Russia."

Shares of Schlumberger Limited closed at $117.95 on Monday, up +0.13% from Friday's close. Nabors Industries gained 1.59 percent in Monday's trading session, closing at $39.37.