Mad Money’s Jim Cramer, in commentary made in a thestreet.com online video, was bullish on Schlumberger (SLB). Other analysts shared his view and the outlook for the company may be rosy: In the video Cramer said, “Schlumberger probably has the best outlook portfolio.” He went on to add, “Energy prices are in a permanently higher echelon. In every case, all the low hanging fruit of natural gas and oil is gone in the world… But, we’re definitely not running out.” He explained the competing forces of the difficulties getting at the supply and the added demand of China and India will keep oil prices higher in the long term.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_02_07_SLB.mp3
The Motley Fool reported in an online article, “Among the service companies, I’m attracted to Schlumberger’s range of products and services, along with its international scope.”
The company, based in Houston, said profit rose an appealing 71% to $1.13 billion from $660 million in the fourth quarter of last year. Analysts had expected per-share profits of about 84 cents. Sales jumped 33% to $5.35 billion from $4.02 billion.
After hitting a high of $77 a barrel last summer, the price of crude has dropped over 50% to under $50 a barrel recently.
Despite the price decrease, oil companies have continued to up spending to boost reserves. That trend will continue, said Schlumberger Chief Executive Andrew Gould in a statement, adding that the days of cheap energy “have ended.”
“While we remain of the opinion that there is no overall shortage of oil and gas reserves, the world is realizing that…new and higher sustained levels of investment are necessary to meet demand and guarantee future supplies,” Gould said.
Schlumberger’s breadth of services, which range from seismic technology to oilfield project management, indicates it is likely to take advantage of the resurgence in exploration activity in the petroleum industry. The company said it expects to see significant growth this year, especially in the Eastern Hemisphere, for exploration, development, and production enhancement-related services.
Competitors:
Competitors for SLB include: Baker Hughes Inc. (BHI), BJ Services Co. (BJS), Halliburton Co. (HAL), Core Labs. NV (CLB), Complete Production Services Inc. (CPX), Newpark Resources Inc. (NR), Precision Drilling Trust (PDS), RPC Inc. (RES), Smith Intl. Inc. (SII), Weatherford Intl. Inc. (WFT), and W-H Energy Srvs. Inc. (WHQ).
Potential Trades:
All of the following option trades have 37 days until expiration. Schlumberger is currently trading at $64.45. These trades were discovered using the powerful suite of option search tools found at PowerOptions.
| Covered Call – Schlumberger LTD (SLB) $64.45 (37) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SLBCM | 07 MAR 65.00 | $2.00 | 3.10% | 3.20% | 4.10% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bull-Call Debit Spread Schlumberger LTD (SLB) $64.45 (37) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sell Opt |
Strike Info |
Bid Price |
Buy Option |
Strike Info |
Ask Price |
% Return |
Break Even |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SLBCZ | 07 MAR $62.50 | $3.40 | SLBCY | 07 MAR $57.50 | $7.50 | 22.00% | $61.60 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The covered call trade, an out of the money covered call, offers 3.1% downside protection and a potential profit of 3.2% if the stock remains unchanged. If the stock rises above the $60.00 strike price, the potential profit becomes 4.1%. The net cost of this trade, per 100 options, is $6,245.00.
The second trade is a bull call debit spread. This trade offers 22.00% potential profit if the stock remains above $62.50. If the stock decreases below the break-even price of $61.60, the investment begins to lose money. If the stock price goes below the lower strike price of $57.50, the entire investment is lost. The net cost of this trade, per 100 options, is $410.00.
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.
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[tags]Mad Money, Jim Cramer, thestreet.com, China, India, Motley Fool, Houston, Andrew Gould, BHI, Baker Hughes Inc., BJS, BJ Services Co., CLB, Core Labs. NV, CPX, Complete Production Services Inc., HAL, Halliburton Co., NR, Newpark Resources Inc., PDS, Precision Drilling Trust, RES, RPC Inc., SII, Smith Intl. Inc., SLB, Schlumberger Ltd., WFT, Weatherford Intl. Inc., WHQ, W-H Energy Srvs. Inc., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options[/tags]