How to Grow a $100 Billion Company by Double Digits

Generating 10.6% revenue growth and 20% income growth (24% adjusted) sounds pretty good for a company with a market cap north of $100 billion. Schlumberger (NYSE: SLB  ) attributes part of this growth to North America, which saw record revenue.

Strong offshore drilling activity combined with a seasonal rebound in Western Canadian activity have driven Schlumberger's recent growth.

Schlumberger is different than other oilfield-services companies like Baker Hughes, as only about a third of Schlumberger's revenue comes from North America, while the rest comes from its international assets.

Sequentially, Schlumberger posted improvements in margins all across the board, with each division posting an operating margin north of 20%.

Future plans
Going into 2014, Schlumberger sees five markets providing strong growth: Russia, Sub-Saharan Africa, the Middle East, China, and Australia.

In the UAE, Schlumberger has been gaining market share and expects to continue to do so going forward. Schlumberger recently won a major contract in the UAE and has been moving the necessary resources to the UAE to keep gaining market share. This contract was a big win for Schlumberger and allowed it to post 25% year-over-year revenue growth.

Schlumberger also sees Iraq and Saudi Arabia as major growth drivers for 2014. Schlumberger is moving additional workers and equipment into Saudi Arabia to keep up with the workload, while Iraqi output is expected to keep climbing, which will increase demand for Schlumberger's services.

Even further out, the return of Libyan production over the next few years will provide a new area of growth from the Middle East. In Schlumberger's latest quarter, it noted that in North Africa it saw a "challenging quarter" due to lower rig activity in Libya spawning from security concerns. While there is still a high chance of continued civil conflict, eventually Libya will want to return to pre-civil war levels of output.

China
The Middle East has treated Schlumberger well in the past and will provide high levels of growth and margin expansion in the future. A relatively new market has emerged for Schlumberger, however; China's shale gas.

PetroChina (NYSE: PTR  ) , the lead company developing China's shale reserves, doesn't have the expertise to drill for gas with a high sulfuric content. 12% of the Sichuan Basin's reserves are considered to be high in sulfuric content, which is why PetroChina sought out Chevron's (NYSE: CVX  ) help in developing the field.

Chevron teamed up with PetroChina to develop the Luojiazhai sour gas field in southwestern China's Sichuan province. PetroChina lacked the necessary anti-erosion and reinjection technology to be able to develop the field, which leaves the area wide open for companies like Chevron and Schlumberger to come in and showcase their new technology.

Schlumberger is going to help manage the Ordos Basin in China and currently has signed a contract for its first SPM (Statistical Parametric Mapping) project in the area. The U.S. Energy Information Agency estimates that China could hold 50% more shale gas than the U.S. Most of that is located in three main areas, one of which is in the Ordos Basin.  

China's shale reserves are thought to be the biggest in the world, which will create a whole new market for Schlumberger to cater to. PetroChina is building three gas processing plants near the Sichuan Basin with the capability to process gas with a high sulfuric content, which means it's confident that its partnership with Chevron will successfully yield high levels of gas output.

Schlumberger is well positioned to leverage its expertise from North American fracking operations and put talented men and women on the ground, which it plans to do in the forth quarter. China has plenty of reasons to tap into shale gas, the biggest of which being that it wants to lower its pollution rate through cleaner burning natural gas and "un-smog" some of its cities.

Schlumberger is well positioned to capitalize on growth all around the globe, which is why it was able to grow into such a big company. Looking ahead, Schlumberger appears to still have plenty of oomph left, and that is just from two of its five major growth areas.

North America
While Schlumberger didn't note North America as a major growth segment, it still can't be discounted. In the third quarter, Schlumberger added four new hydraulic fracking fleets in North America, which led to a 7% sequential increase in its completed stage count.

Schlumberger also created a data consortium business model, which allows various customers with neighboring acreage to share reserve and production data with each other. This allows for the construction of better 3D reservoir models and for exploration and production players to co-fund part of their projects. 

Better modeling and lower costs gives Schlumberger a compelling selling point, and gives a big incentive for companies to partner up with Schlumberger to gain access to that data.

Utilizing 3D seismic models and production levels from various parts of a play has enabled E&P players to find the best locations to drill, which is why production and recovery rates per well have increased.

Final thoughts
Schlumberger is a huge company, and the law of large numbers makes it harder for the business to grow as time wears on. Schlumberger isn't afraid of getting bigger; it knows how to keep on growing no matter how big it gets. Schlumberger's mentality has greatly rewarded long-term investors, which is why it has beaten the market by 400% over the past decade while paying out a 1.4% dividend. 

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