Name of the Company: Schlumberger Limited
Business Sector: Oil Field Services & Equipments
Operating Geography: Europe, France, Global
About the Company: Schlumberger, founded in 1926 in France, it is world’s leading provider of technology for reservoir characterization, drilling, production, and processing to the oil and gas industry. The company has four principal executive offices located and in Paris, London, Houston and The Hague. It employs over 100,000 people of over 140 nationalities operating across 85 countries
Revenue: US$ 27.8 billion in 2016
SWOT & PESTLE Analysis
|1. Diversity of workforce|
2. Technology innovation & infrastructure
3. Extensive service offering
4. Market share leadership
|1. Weakening financial position from past two years
2. Significant revenue from Non-US states exposes company to several risks
3. High dependency of revenue on the level of expenditure by clients
|1. New mergers & acquisitions|
2. Rising demand of oil and natural gas as fuel
|1. Dynamic prices of crude oil and natural gas
2. Rise of substitute fuels
3. High environmental compliance cost
4. Failure to retain skilled personnel
5. Severe weather conditions
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1) Diversity of Workforce: Individual of diverse nationalities, values and culture work together and share common objectives. The company operates in truly global context and encourages fair employment practices worldwide. The company strives to attract and retain its best performers worldwide by addressing their needs and concerns in terms of quality of life and career expectations. Company maintains its competitive edge by creating variety of perspectives through diverse workforce that stimulates creativity and innovation.
2) Technology Innovation & Infrastructure: The Company’s commitment to technological innovation and quality services are point of differentiation to compete with small and large competitors which vary geographically w.r.t. different services offered. Also, developing IT infrastructure by implementing Software Integrated Solutions to customers for excellent data analysis for different services.
3) Extensive service offering: Schlumberger Oilfield Services operates in each of the major oilfield service markets covering the entire life cycle of the reservoir.
These services are organized into seven technology product lines which are as follows:
Schlumberger holds leading positions in many product lines within the Geo Market Regions.
4) Market Share Leadership: Schlumberger dominates the oilfield segment with 11.81% market share. Followed by its competitors Baker Hughes Inc., General Electric Company and Halliburton Comany with market shares of 5.36%, 5.48% and 4.53% respectively.
1) Weakening Financial Position from past 2 years: Schlumberger’s revenue of $ 27.8 billion in 2016 decreased by 22% from 2015, without the revenue from Cameron Group, this decline accounts for 34%. This drop was due to weak exploration and production spending as a result of deepest industry downturn in more than 30 years (up to $26 per barrel).
2) Significant revenue from Non-US states exposes company to several risks: Non-US operations accounted for significant portion of revenue, approximately 80% of consolidated revenue in 2016, 78% in 2015 and 71% in 2014. Operations in each of the over 85 countries exposes the company to various social, political, legal and economic risks in doing business.
3) High dependency of revenue on the level of expenditure by clients: Demand for majority of services is heavily dependent on customer expenditure on the exploration, development and production of oil and natural gas reserves. These expenditures are directly dependent on customer’s view of future oil and natural gas prices and affect the demand. As a result, many customers have reduced their spending on E&P which had adverse financial impact.
1) New Mergers & Acquisitions: The Company, right from inception has built several platforms and extended its production portfolio by merger & acquisitions. Merger with Cameron International in 2016 produced the industry’s first pore to pipeline portfolio of technology products and services and boosted the revenue. Therein lies the rationale to opt this way for growth and development.
2) Rising demand of oil & natural gas as fuel: The tightening of supply and demand balance continued as by a steady draw in OECD stocks. Therefore, in later parts of 2017 and leading into 2018 accelerating growth in E&P investment in main producing regions around the world driven by growth in demand, decreasing supply and the challenge of replacing production lost to decline. Also, in World Energy Outlook - 2016, the international Energy Agency cited that demand for oil and gas would require more than $17 trillion in upstream investment until 2040.
1) Dynamic prices of Crude Oil and Natural Gas: The price of oil and natural gas has been volatile and no assurance can be given that pricing for oil and natural gas will follow historic patterns.
Several factors affect that lead to dynamic prices are as follows:
Excess production capacity
High level of oil and gas exploration and production capacity
OPEC countries setting and maintaining production levels for oil
Governmental policies and subsidies
Technological advances affecting energy consumption 2) Rise of Substitute Fuel: The main substitutes for oil and gas energy include nuclear power, solar power, ethanol and wind power. Fossil fuels minimize the usage of these substitutes in global and domestic energy markets as they are very expensive, but there is considerable public impetus to increase their utilization.
3) High Environmental Compliance Cost: Hazardous substances are used and generated in operations of the company. So, the company comes under the purview of environmental protection laws, including laws on governing air emissions, hydraulic fracturing, water discharges and waste management. These laws are becoming increasingly complex, stringent and expensive to implement.
4) Failure to obtain and retain Skilled Personnel: Highly skilled personnel are required to operate and render technical and support services for this business. In times of high utilization it becomes difficult to find and retain such skilled individuals. It may also lead to increased cost of operations and adverse impact.
5) Severe Weather Conditions: The sites of operation involve high risk due to severe weather conditions. Sometimes, acute conditions lead to evacuation of personnel, suspension of activities and stoppage of services. Any of these events will affect the financial condition of the companies.Schlumberger Limited SWOT analysis has been conducted by Manashvi Mistry and reviewed by senior analysts from Barakaat Consulting.
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