Schlumberger N.V. (SLB)

Schlumberger Limited is the most internationally diverse and evenly spread company in the industry, meaning that an adverse event in any one location would not affect its output as greatly as it might affect competitors.

Schlumberger currently enjoys the technological advantage in most of the services in which it concentrates. It has recently acquired smaller holdings for research purposes and plans to expand its operations.

In the company's first quarter 2010 earnings report, Andrew Gould, Schlumberger's CEO, argued that profit margins for the company's international operations reached a low point in the first quarter and have the potential of resuming a positive trend.^[1] Drilling activity also improved during the first quarter as energy companies look to take advantage of higher oil prices and natural gas shales. However, Gould noted that the performance of natural gas prices and demand remains unclear beyond the second quarter.^[2] High supply levels of natural gas have the potential of keeping prices low, especially in North America. Still, improvements in price margins in Schlumberger's international operations, which composes a majority of its business, as well as overall improved rig activity are likely to lead to long-term growth for Schlumberger.^[3]

In the company's first quarter 2010 earnings report, Andrew Gould, Schlumberger's CEO, argued that profit margins for the company's international operations reached a low point in the first quarter and have the potential of resuming a positive trend.^[1] Drilling activity also improved during the first quarter as energy companies look to take advantage of higher oil prices and natural gas shales. However, Gould noted that the performance of natural gas prices and demand remains unclear beyond the second quarter.^[2] High supply levels of natural gas have the potential of keeping prices low, especially in North America. Still, improvements in price margins in Schlumberger's international operations, which composes a majority of its business, as well as overall improved rig activity are likely to lead to long-term growth for Schlumberger.^[3]

Gould noted that domestic oil drilling in service-intensive shale natural gas fields should sustain demand for services through the second quarter, but "beyond that the picture is less clear," as natural gas prices "remain uncertain."

At the end of April 2010 SLB reported that first quarter earnings missed analyst estimates across the board. However, the stock continued to hit record highs. This was due largely to comments by its CEO Andrew Gould.

Andrew Gould said that profit margins have reached bottom in the 1Q at 20-something percent. This matters because:

1. If margins have reached their lowest point, then they are likely to improve over the rest of the year. 2. Gould and analysts had originally believed that margins would bottom out during the second or third quarter. This is the way in which SLB "beat" Wall Street's (and Gould's) expectations. 3. Gould is very very respected in the oil services/ energy field. If he starts making bullish statements, analysts tend to follow his lead. I wouldn't be surprised if every equity researcher recommends buying this stock.

This demonstrates what the right CEO can mean to investors. His reputation, combined with the right comments and reputation, helped to comfort investors and keep the share price up even when earnings missed their mark.

As the easier-to-find deposits of oil and gas are used up and costs of maintaining old technology rise, firms will turn to Schlumberger and other such providers, increasing demand for their new technology and cost-saving services.