We recently published a list of the 8 Most Profitable Oil Stocks To Invest In. In this article, we are going to take a look at why Schlumberger Limited (NYSE:SLB) is one of the best oil stocks to invest in.
OPEC Anticipated to Hold Oil Supply
One of the leading oil-producing regions, OPEC countries and its allies are expected to extend their latest round of oil production cuts for the first quarter of 2025, according to analysts. OPEC+ controls nearly half of the world’s oil production and supply. The oil governing body was planning to initiate unwinding output cuts through 2025. However, the decline in global demand and output outside OPEC could impact oil prices.
“Market participants are closely watching to see if OPEC+ will focus on bolstering prices by extending production cuts, or opt to defend its share of the global crude oil market by easing those cuts,” said Satoru Yoshida, commodity analyst with Rakuten Securities. Yoshida added that the OPEC decision to cut oil supply would potentially have a short-term impact. Still, the market is anticipated to rise by the year-end following the takeover of the Trump administration.
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The OPEC+ countries are holding around 5.86 million barrels per day of output, which accounts for almost 5.7% of global demand. To support the oil market, the oil supply has been managed in a series of steps agreed since 2022. The OPEC members had planned an output increase of 180,000 barrels per day for January 2025. The non-OPEC+ countries are expected to boost the oil supply by almost 1.5 million barrels per day in 2025. Nevertheless, the global oil benchmark Brent Crude has mostly traded between $70 to $80 per barrel in 2024, while it hit a 2024 low below $69 in September.
The global oil market is impacted by several factors including, geopolitical risks, production levels, and OPEC’s strategies. The ceasefire between Israel and Hezbollah could affect prices, but the new war in Syria could potentially be a new issue for oil producers. However, oil prices remain lower than expected based on inventory fundamentals. In the long term, oil price hikes above $100 are less likely to occur due to the impact of U.S. shale production over the past decade.
With that, let’s take a look at where Schlumberger Limited (NYSE:SLB) ranks among the most profitable oil stocks to invest in.
A engineer overseeing a exposed network of pipelines connected to tanks at an oil refinery.
Our Methodology
To compile our list of the 8 most profitable oil stocks to invest in, we scanned oil stocks through Finviz Screener using two indicators. We shortlisted the stocks with a minimum net income of $2.5 billion or more in the trailing twelve months (TTM) and a 5-year net income compound annual growth rate (CAGR) of over 10%. From that list, we narrowed our choices to the 8 stocks widely held by hedge funds, as of Q3 2024. As of the third quarter, the list is ranked in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Schlumberger Limited (NYSE:SLB)
Number of Hedge Funds Holders: 65
5-Year Net Income CAGR: 39.37%
TTM Net Income: $4.48 Billion
Schlumberger Limited (NYSE:SLB) is the world’s largest oilfield services company. The company is a key player in the crude oil industry, delivering drilling, exploration, and production solutions to major clients, including Aramco, ExxonMobil, and Chevron. The company operates through four segments including, digital and integration, reservoir performance, well construction, and production systems.
The demand for Schlumberger Limited’s (NYSE:SLB) digital products and services continues to increase in the Middle East and Asia, driven by oil capacity expansions, strong gas activity, and offshore projects. The revenue growth remains solid in Europe and Africa, mainly due to strong production and recovery activity in North Africa.
The company’s digital and integration segment is making a massive stride, which adds great support to revenue growth. In Q3, the segment achieved a new quarterly revenue high and improved profitability, increasing the company’s pretax segment operating margin to 36%. Schlumberger Limited (NYSE:SLB) is focused on its digital services and continues to enhance its portfolio with improved offerings. The company is working in collaboration with NVIDIA and AWS to strengthen its digital portfolio, in addition to the release of the Lumi AI platform.
With the Trump administration back, the U.S. energy sector could potentially improve for oil companies and Schlumberger is well-positioned to benefit from that.
Overall, SLB ranks 3rd on our list of the most profitable oil stocks to invest in. While we acknowledge the potential of SLB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SLB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.