As noted in the portfolio update this week, our only oil and gas services recommendation in the model portfolio right now is Schlumberger (NYSE: SLB). That’s been the right move as shares in SLB are the top-performing of the Big 3 services names over the past year.
Our rationale for recommending SLB over Halliburton and Baker Hughes is that SLB is almost a pure play on oil and gas development activity outside North America – in the most recent quarter, more than 80% of SLB’s revenue came from outside North America with most of its exposure in the region consisting of services sold to support offshore drilling operations in the Gulf of Mexico.
In other words, SLB has limited exposure to services and equipment used to facilitate the production of oil and gas from US shale fields. In contrast, Halliburton derived almost 42% of Q3 revenues from North America and Baker Hughes roughly 24%.
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Elliott and Roger on Nov. 30, 2021
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