It's not just exploration and production stocks that rallied on the back of the U.S. capture of former Venezuelan President Nicolas Maduro. Oil services providers got in on that act, too. Just look at SLB (SLB +3.13%). One of the global giants in the oil services arena, SLB tacked on 25% since the start of the year, implying the stock is a buy here and now.
Look a little closer, and investors will see a 3.30% drop for the five days ended Feb. 2. That's not a correction, let alone a bear market, but SLB's recent lethargy may signal patient investors can get better pricing over the near term.
SLB earned a Venezuela bump, but it has other long-term catalysts. Image source: Getty Images.
It's a good thing, too, because this stock features a sturdy bull case, including the potential to benefit from liberalization of Venezuela's oil market.
Sizing up SLB's Venezuela exposure
Investors who have been monitoring the situation in Venezuela are by now likely aware that Chevron is generating ample buzz as the way to tap into a possible production surge in the South American country. The reasoning is simple: Chevron remained operational there after the country nationalized its energy industry in 2007.
The same is true of SLB. In fact, the company said it's ready to accelerate activity in Venezuela when it gets the green light. In part, that explains why this oil services stock emerged as a sort of Venezuela momentum trade. SLB's momentum in Venezuela was rooted in credibility. Yes, the country has the world's largest oil reserves, but it's been years since it let its infrastructure wither. As a result, output tumbled.
Put it this way: As recently as 2014, there were periods in which approximately 80 rigs were pumping in Venezuela. Today, it's just a handful. Having 303 billion barrels in proven reserves means nothing if the infrastructure and technology aren't in place to extract that petroleum.
NYSE: SLB
Key Data Points
SLB has relationships with Western oil majors and the services and technology they need to be successful in Venezuela, assuming the best-case scenario there comes to pass, but that one country isn't the only reason to consider the stock over the near term.
There's more to the SLB story than Venezuela
SLB is arguably a good test of the efficient market hypothesis, suggesting that positive Venezuela news is likely priced into the shares. That may also imply that catalysts for oil services stock attributable to that country may be limited until it becomes clear that the environment there has become more inviting to integrated oil majors.
Fortunately, other catalysts are there, and those sparks might surprise some investors. Helped by the recently completed acquisition of ChampionX, SLB has an increasingly digital footprint, including exposure to the fast-growing data center solutions market. SLB offers a suite of artificial intelligence (AI) tools for energy producers. It even has a long-standing partnership with Nvidia.
Those aren't the traditional hallmarks of oil services providers, but they underscore SLB's adaptability and status as a catalyst-rich stock, and that's without accounting for potential long-term strides in Venezuela.
