Schlumberger (SLB) shares closed about 9% higher on Jan. 5 amid a broader rally in U.S. oil stocks after the White House confirmed a military strike on Venezuela and detained its president.
The geopolitical escalation and the related surge in SLB lands only days before the oilfield services company is scheduled to report its earnings for the fourth quarter (Q4).
At the time of writing, SLB stock is up more than 35% versus its October low.
Why SLB Shares Rallied on U.S.-Venezuela News
On Monday, President Donald Trump’s administration said major U.S. oil companies will invest billions to rebuild Venezuela’s deteriorated oil infrastructure, creating unprecedented optimism for oil services firms.
Venezuela has the world’s largest proven oil reserves at 303 billion barrels, yet current production has collapsed to just 960,000 barrels a day from historical peaks of 3.5 million in the 1970s.
This dramatic production decline represents a massive opportunity for specialized oilfield services companies like Schlumberger capable of executing complex infrastructure rebuilding projects.
In short, SLB shares are worth buying today as the company’s expertise in reservoir mapping, well technology, and equipment mobilization makes it indispensable for revitalizing Venezuela’s ailing oil infrastructure.
SLB Stock May Rally After Earnings on Jan. 23
Schlumberger shares appear attractive also because Venezuela owes the NYSE-listed firm roughly $469 million for past services, creating additional upside potential if the U.S. takeover leads to debt settlements.
Additionally, the company’s recent acquisition of ChampionX has strengthened its production and reservoir optimization services, adding more than $500 million to quarterly revenue with expected annual synergies of $40 million within three years.
In the near term, SLB could rally on Q4 earnings scheduled for Jan. 23. Expectations are for it to earn $0.74 a share (adjusted), up some 7% sequentially.
Plus, the Houston-headquartered firm pays a dividend yield of 2.6%, which makes it even more compelling as a long-term investment at current levels.
Wall Street Remains Bullish on Schlumberger
SLB stock has been in a sharp uptrend since early October, but Wall Street analysts believe it’s not out of juice just yet.
The consensus rating on Schlumberger shares remains at “Strong Buy” with price targets going as high as $82, indicating potential upside of a whopping 87% from here.
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On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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