Last week, I wrote here that while I was not in the “WTI to $10” camp of doom and gloom for energy, I could see short-term dynamics pushing crude to the mid-to-upper-teens before some sort of recovery took hold. This morning, near dated WTI futures (the May 2020 CLK20 contract) dropped to a low of $17.31 before bouncing to just above $18. So far, so good, and with the June contract (CLM20) trading above $25, it seems that the market agrees that a significant recovery is coming before too long
I also said last week that if that was the case, investors should e considering what to buy when WTI got into the teens, so now is a good time to explore some options.
The topical pick, and one that makes sense in a lot of ways, is Schlumberger (SLB).
The oilfield services company has been hit hard as oil has declined, dropping from above $75 just a couple of years ago to under $15. That is understandable given that the response to that of most energy companies has been massive cuts to capex but when SLB released Q1 2020 results this morning, there were some positives among the bad news.
Bad news first....
On an adjusted basis, earnings were basically as expected at $0.25 per share, but that was after a massive pre-tax goodwill charge of $8.5 billion. Before that adjustment, SLB lost $5.32 a share. They also cut the dividend by 75% and made big cuts in staffing. So, given all that, what can possibly be good?
Well, the main…