Analyst Note
| Preston Caldwell |Schlumberger reported third-quarter revenue down 2%, but adjusted operating margins jumped to 8% from 4% in the prior quarter. Partly this was an artificial boost due to asset write-offs, which lowered depreciation and amortization expense, but EBITDA margins (unaffected by the write-offs) also increased to 19% from 16%. The main cause of the improved profitability was execution of management's plan to cut $1.5 billion in fixed costs. Our fair value estimate and narrow moat rating are unchanged following the results.