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Schlumberger (SLB) to Exit From OneLNG JV, Fortuna Project

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Schlumberger Limited SLB recently decided to break the OneLNG joint venture (JV) with Golar LNG Limited GLNG, primarily due to financial delays. The JV was created to develop the offshore Fortuna LNG project in Equatorial Guinea, in association with Ophir Energy Plc OPHRY. The project is located in the Block R, operated by Ophir.

Although the development plan of the project was ready way back, finding attractive debt financing for the project and finalizing on the investment decision got delayed. The JV was created in July 2016, in which Schlumberger holds 49% stake. The JV holds 66.2% interest in the Joint Operating Company — which was created to develop the offshore Fortuna FLNG project — and Ophir owns the rest of the stake. The total cost of the Fortuna project is anticipated to be around $2.1 billion.

The investment decision was supposed to be finalized in mid-2016 and got postponed several times since then. The project even received an ultimatum from the Equatorial Guinea authorities to speed up the process.

With oil price on the rise, the profitability of the project has increased. Yet, the final investment decision failed to meet the previously announced timelines. Focusing on the project would only block Schlumberger’s resources, which the company can use in other projects.

Price Performance

Houston, TX-based Schlumberger is a leading oilfield services company, providing technology, project management and information services to the global oil and gas industry. The company has lost 1.6% in the past year compared with 6.7% decline of its industry.

Zacks Rank and a Stock to Consider

Currently, Schlumberger has a Zacks Rank #3 (Hold).

Investors interested in the Energy sector can opt for a better-ranked stock in the same space like BP p.l.c. (BP - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

London-based BP is an integrated oil major. For 2018, its bottom line is likely to be up 67.6%. In the last four reported quarters, the company delivered an average positive earnings surprise of 29.6%.

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