Credit Suisse Gets 'Back In The Saddle' With Schlumberger, Sets Outperform Rating

Schlumberger Limited SLB is in the process of merging with Cameron International Corporation CAM, which Credit Suisse’s James Wicklund is “an oilfield services company that is exceptionally well positioned to gain share, improve margins, and post higher returns near a cyclical bottom.”

The analyst reinstated coverage of Schlumberger with an Outperform rating and price target of $80.

Accretive Merger

“SLB bought CAM in the midst of a transformational effort to (1) make the company more efficient, integrated and technologically capable and (2) to shift to a more performance-compensated business model by being present at the wellhead for a longer period of time,” Wicklund mentioned.

The analyst explained these structural changes to the oilfield services business model were aimed at improving returns to a market leading figure.

Wicklund believes Cameron International’s historical return profile would be accretive to Schlumberger’s returns, EPS and economic profit.

Market Leader

According to the Credit Suisse report, “When the market begins to recover, the structural changes in the industry will be from the development and efficient application of technology, the efficient deployment of capital, and the ability to manage risk in pursuit of higher returns.”

Schlumberger’s commitment to superior profitability and technology, especially given the backdrop of a company that was able to transform during a downcycle, combined with the company’s wide capabilities, would minimize the impact of any slowing in deepwater and exploration activity.