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SLB Warns of Flat Q2 on Saudi and Latin America Activity Slowdown
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Key Takeaways
SLB expects Q2 revenues and EBITDA to be flat due to weaker drilling in Saudi Arabia and Latin America.
Paused activity at Jafurah and short-cycle pullback in Latin America hurt SLB's performance.
SLB sees margin pressure from an unfavorable activity mix but retains its $4B shareholder return target.
SLB (SLB - Free Report) , the oilfield services giant, anticipates its second-quarter 2025 revenues and core profit to remain flat on a sequential basis, primarily due to an unexpected slowdown in drilling activity in Saudi Arabia and Latin America, per a Reuters report.
According to the report, CEO Olivier Le Peuch provided the updated outlook during the J.P. Morgan Energy, Power & Renewables Conference in New York. He noted that actual field activity in the quarter has diverged from the company’s original assumptions, particularly in the Middle East and South America.
SLB Hit by Weaker Drilling Activity in Saudi Arabia & Latin America
According to Le Peuch, several drilling rigs were demobilized in Saudi Arabia and operations were paused at the Jafurah unconventional gas field. These developments contributed significantly to the softer-than-expected operational performance for the quarter. The Jafurah field, one of the largest shale gas developments outside the United States, has been central to SLB’s regional business in recent years, making the pause especially impactful.
Meanwhile, in Latin America, SLB reported a decline in short-cycle project activity, further pressuring top-line growth. Short-cycle operations, often associated with faster returns, have become increasingly sensitive to pricing and capital discipline, and the pullback in activity reflects shifting customer behavior in the region.
Unfavorable Activity Mix to Hit Margins
Le Peuch cautioned that the company’s margin profile will be affected in the second quarter due to what he described as an unfavorable geographical activity mix. The decline in higher-margin Middle Eastern and Latin American operations, coupled with cost rigidity in service delivery, is likely to weigh on profitability. As a result, SLB expects second-quarter EBITDA to come in flat quarter over quarter, falling slightly below its prior guidance.
The CEO also highlighted geopolitical risk in the region, stating that the company’s current forecast assumes no disruptions to operations in the Persian Gulf amid ongoing tensions. Any escalation could pose additional downside risks.
Shareholder Return Target Remains Intact
Despite the operational headwinds, SLB reaffirmed its commitment to its capital return program. The company still plans to return at least $4 billion to shareholders in 2025, signaling confidence in its overall financial resilience and long-term strategic positioning.
SLB’s Zacks Rank & Key Picks
SLB currently carries a Zack Rank #3 (Hold).
Investors interested in the energy sector may look at a few better-ranked stocks like Subsea 7 S.A. (SUBCY - Free Report) , W&T Offshore, Inc. (WTI - Free Report) and Oceaneering International, Inc. (OII - Free Report) . Subsea 7 presently sports a Zacks Rank #1 (Strong Buy), while W&T Offshore and Oceaneering International carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Subsea 7 helps build underwater oil and gas fields. It is a top player in the Oil and Gas Equipment and Services market, which is expected to grow as oil and gas production moves further offshore.
The Zacks Consensus Estimate for SUBCY’s 2025 EPS is pegged at $1.31. The company has a Value Score of A.
W&T Offshore benefits from its prolific Gulf of America assets, which offer low decline rates, strong permeability, and significant untapped reserves. The company’s acquisition of six shallow-water fields in the GoA added 18.7 million barrels of proved reserves and 60.6 million barrels of proved plus probable reserves. The firm is focused on strategically allocating capital toward organic projects, which should boost its production outlook. WTI has a Value Score of B.
Oceaneering International delivers integrated technology solutions across all stages of the offshore oilfield lifecycle. With a geographically diverse asset portfolio and a balanced revenue mix between domestic and international operations, the company effectively mitigates risk. As a leading provider of offshore equipment and technology solutions to the energy sector, OII benefits from strong relationships with top-tier customers, ensuring revenue visibility and business stability.
The Zacks Consensus Estimate for OII’s 2025 EPS is pegged at $1.79. The company has a Value Score of B.
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SLB Warns of Flat Q2 on Saudi and Latin America Activity Slowdown
Key Takeaways
SLB (SLB - Free Report) , the oilfield services giant, anticipates its second-quarter 2025 revenues and core profit to remain flat on a sequential basis, primarily due to an unexpected slowdown in drilling activity in Saudi Arabia and Latin America, per a Reuters report.
According to the report, CEO Olivier Le Peuch provided the updated outlook during the J.P. Morgan Energy, Power & Renewables Conference in New York. He noted that actual field activity in the quarter has diverged from the company’s original assumptions, particularly in the Middle East and South America.
SLB Hit by Weaker Drilling Activity in Saudi Arabia & Latin America
According to Le Peuch, several drilling rigs were demobilized in Saudi Arabia and operations were paused at the Jafurah unconventional gas field. These developments contributed significantly to the softer-than-expected operational performance for the quarter. The Jafurah field, one of the largest shale gas developments outside the United States, has been central to SLB’s regional business in recent years, making the pause especially impactful.
Meanwhile, in Latin America, SLB reported a decline in short-cycle project activity, further pressuring top-line growth. Short-cycle operations, often associated with faster returns, have become increasingly sensitive to pricing and capital discipline, and the pullback in activity reflects shifting customer behavior in the region.
Unfavorable Activity Mix to Hit Margins
Le Peuch cautioned that the company’s margin profile will be affected in the second quarter due to what he described as an unfavorable geographical activity mix. The decline in higher-margin Middle Eastern and Latin American operations, coupled with cost rigidity in service delivery, is likely to weigh on profitability. As a result, SLB expects second-quarter EBITDA to come in flat quarter over quarter, falling slightly below its prior guidance.
The CEO also highlighted geopolitical risk in the region, stating that the company’s current forecast assumes no disruptions to operations in the Persian Gulf amid ongoing tensions. Any escalation could pose additional downside risks.
Shareholder Return Target Remains Intact
Despite the operational headwinds, SLB reaffirmed its commitment to its capital return program. The company still plans to return at least $4 billion to shareholders in 2025, signaling confidence in its overall financial resilience and long-term strategic positioning.
SLB’s Zacks Rank & Key Picks
SLB currently carries a Zack Rank #3 (Hold).
Investors interested in the energy sector may look at a few better-ranked stocks like Subsea 7 S.A. (SUBCY - Free Report) , W&T Offshore, Inc. (WTI - Free Report) and Oceaneering International, Inc. (OII - Free Report) . Subsea 7 presently sports a Zacks Rank #1 (Strong Buy), while W&T Offshore and Oceaneering International carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Subsea 7 helps build underwater oil and gas fields. It is a top player in the Oil and Gas Equipment and Services market, which is expected to grow as oil and gas production moves further offshore.
The Zacks Consensus Estimate for SUBCY’s 2025 EPS is pegged at $1.31. The company has a Value Score of A.
W&T Offshore benefits from its prolific Gulf of America assets, which offer low decline rates, strong permeability, and significant untapped reserves. The company’s acquisition of six shallow-water fields in the GoA added 18.7 million barrels of proved reserves and 60.6 million barrels of proved plus probable reserves. The firm is focused on strategically allocating capital toward organic projects, which should boost its production outlook. WTI has a Value Score of B.
Oceaneering International delivers integrated technology solutions across all stages of the offshore oilfield lifecycle. With a geographically diverse asset portfolio and a balanced revenue mix between domestic and international operations, the company effectively mitigates risk. As a leading provider of offshore equipment and technology solutions to the energy sector, OII benefits from strong relationships with top-tier customers, ensuring revenue visibility and business stability.
The Zacks Consensus Estimate for OII’s 2025 EPS is pegged at $1.79. The company has a Value Score of B.