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Schlumberger Awarded Drilling Contract in Venezuelan Project

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Oilfield services provider, Schlumberger Limited (SLB - Free Report) recently announced that it has been contracted for a major drilling project in Venezuela. The said contract is for one of the world's largest drilling projects for Venezuelan state oil company, Petróleos de Venezuela SA. Reportedly, the latter is planning to drill a total of 480 new wells in the Orinoco region, targeting an extra 250,000 barrels of oil per day over the next 30 months.

Per the agreement, Schlumberger will be responsible for drilling 80 wells in an extra-heavy oil field in the Orinoco Belt as part of a $3.2 billion project. It is to be noted that Schlumberger will be the only public company among the three contractors for the major project.

The other winners of the tender – Oklahoma-based Horizontal Well Drillers LLC and Venezuela’s Y&V Group – will be responsible for drilling the remaining wells. Moreover, other project-related activities will be carried out by Houston-based firms Halliburton Co. (HAL - Free Report) and Baker Hughes Inc. . Terms of the deal, however, are still under discussssion.



This project is quite an exception to Schlumberger’s recent strategy of cutting back on its projects in Venezuela due to worsening payment delays by Petróleos de Venezuela. Also, since 2014, the company has shed more than $500 million in Venezuelan assets.

Schlumberger is a leading oilfield services company that provides technology, project management and information services to the global oil and gas industry. The combination of its strong balance sheet, technological leadership and efficient management is expected to prove beneficial over the long term.

Moreover, Schlumberger’s efforts to increase its capacity in pressure pumping and strengthening deepwater activity in the Gulf of Mexico are likely to add to its revenues, going forward. While hydraulic fracturing pricing and land drilling activity remain depressed throughout North America, the company has more than offset the negatives with its superior technology, internal efficiency gains and size.

As a result, Schlumberger currently carries a Zacks Rank #3 (Hold), which implies that it will perform in line with the broader U.S. equity market over the next one to three months.

A better-ranked player from the broader energy sector is NGL Energy Partners L.P. (NGL - Free Report) . The partnership sports a Zacks Rank #1 (Strong Buy). For the last four quarters, the partnership posted an average positive earnings surprise of 228.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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