Total Energy Services Inc. (TOT), Precision Drilling Corp (USA) (PDS), Schlumberger Limited. (SLB): The Pill To Cure Total Energy Services Is Not Found In Canada

Schlumberger Limited. (NYSE:SLB) makes more than two-thirds of its revenue outside North America, and witnesses an exploration and drilling boom in Saudi Arabia, China, Australia and several other international markets. This has helped Schlumberger repurchase over 105 million shares of common stock thus far, for a total purchase price of $7.8 billion and the remaining balance of $187 million will be exhausted in Q3. Last July, Schlumberger Limited. (NYSE:SLB) approved a new share repurchase program of $10 billion to be completed by June 30, 2018.

After all, Total Energy Services Inc. (TSX:TOT) doesn’t need to re-invent the wheel. If Total doesn’t want the operational downtrend to stick around, it needs to make a deliberate choice to expand in emerging petroleum basins internationally. These basins (i.e. Llanos Basin in Colombia, Reconcavo Basin in Brazil, Amazon Basins in Peru and Ecuador) have been undergoing rapid growth in exploration spending. The game is also less competitive there than in North America where the supply often exceeds the demand, leading in pricing pressure.

The international drilling projects aren’t risk-free. There is no such thing as a free lunch, right? The international business bears country’s risk, currency risk or repatriation of income and capital risks. However, there are emerging markets with political stability where all these risks can be significantly mitigated.

Foolish Take Away

The low natural gas prices along with competitive pressures and weather related delays in the post break-up season are significant headwinds for any oilfield service company that focuses in Canada. Meanwhile, the booming drilling activity internationally in conjunction with low competition and a favorable operating environment with lower seasonality and cyclicality, create a cocktail that Total needs to gulp in order to remain competent and return back to a growth trajectory.

The article The Pill To Cure Total Energy Services Is Not Found In Canada originally appeared on Fool.com and is written by Nathan Kirykos.

Nathan Kirykos has no position in any stocks mentioned. The Motley Fool owns shares of Precision Drilling Trust.

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