Source: Barron’s

Like many cyclical businesses, Schlumberger (NYSE:SLB) has been reeling from the knock-on effects of COVID-19. The pandemic has practically brought business activity to a standstill and created demand destruction for oil. SLB is down over 45% Y/Y; its Q2 revenue fell 28% Q/Q, while EBITDA was off 39%. The company announced a restructuring that would involve laying off about 21,000 employees. In my opinion, some of the company’s problems began with its ill-timed investment in North America.

The Situation

Schlumberger has been known as a well-diversified, international player in the oil services space. Baker Hughes (BKR) and Halliburton (HAL) have traditionally dominated the North America land drilling market. North America land drilling had previously been white hot, putting Halliburton and Baker Hughes in the catbird seat. Schlumberger’s revenue from North America had previously been in the 23% to 25% range pursuant to total revenue.

In early 2017, Schlumberger