SLB LIMITED/NV (SLB) stock intrinsic value fair value estimate & owner earnings analysis

SLB (formerly Schlumberger) is the world's largest oilfield services company. It sells the technology, equipment and crews that oil and gas producers use to find, drill, complete and keep producing wells: reservoir evaluation and wireline (Reservoir Performance), drilling services and drill bits (Well Construction), wellheads, subsea systems, artificial lift and, since the July 2025 ChampionX purchase, production chemicals (Production Systems), plus a growing software and data business (Digital). About three quarters of sales come from outside North America, with Saudi Arabia, the wider Middle East, Latin America and offshore Africa the biggest swing markets. Its customers' spending follows oil and gas prices, so SLB's cash generation is strongly cyclical. How we measured earning power. We start from cash from operations, strip out working-capital timing swings, charge stock-based pay as the real cost it is, and deduct the capital spending needed to stand still. For SLB we count all three kinds of capital spending as capital spending: equipment, investments in client production projects (APS) and capitalized seismic/exploration data, because all three are written off through depreciation. Only the part of spending that funded revenue growth is treated as optional. On that basis, owner earnings per share were about $1.68 (2016), $1.44 (2017), $1.95 (2018), $1.97 (2019), $1.34 (2020), $1.59 (2021), $2.29 (2022), $3.01 (2023), $3.43 (2024) and $2.66 (2025). We value the business before its lenders, so we add back cash interest (about $0.5-0.6 billion a year), which gives business cash flow of $2.5 billion in the 2020 trough, $4.9 billion in 2023, $5.4 billion in 2024 and $4.4 billion in 2025. Which years we used. The business changed in late 2020 when SLB sold its North American fracking unit and stopped putting large sums into production-project investments, many of which were written off in 2019-2020. Earlier years describe a heavier, lower-return business. We therefore measure normal earning power over 2020-2025, a full cycle from the COVID trough to the 2024 peak. The middle of that range is about $4.0 billion of business cash flow for SLB as it stood before ChampionX. ChampionX added about $3.4 billion of annual revenue (2024, per SLB's 10-K); we credit it with roughly $0.5 billion a year, in line with the cash margin of the rest of SLB. Normal business cash flow is therefore about $4.5 billion, or roughly $3.00 per share on the 1.51 billion diluted shares after the deal. SLB booked large write-offs in 2016-2020 and $331 million of impairments in 2025. These accounting charges do not reduce our cash measure. We carry that history of overpaying for acquisitions in our bear case and in how we treat the pending Kelvion deal instead. Recent trend. Owner earnings fell about 19% in 2025, a year that included $457 million of restructuring and merger charges and a drop in drilling in Saudi Arabia, Mexico and offshore Africa. Excluding ChampionX, revenue was down about 5% year on year in the second quarter of 2026, and Middle East revenue fell 13% from the prior quarter because of regional conflict. However, operating cash flow in the first half of 2026 ($1.85 billion) was slightly above the first half of 2025 ($1.80 billion). Our base case therefore starts slightly below normal, at about $4.3 billion in year one. That is a 5% decline from normal, against the 19% fall in 2025, and the stable first-half 2026 cash flow is why we do not extend the full 2025 decline. Growth credited. None. The planned $400 million of ChampionX cost savings, the Data Center Solutions business that management expects to exceed a $1 billion annual revenue run rate, and digital revenue growth are all management goals or new markets rather than results already in hand, so no case includes them. Each case simply cycles around a level SLB has already earned. Bear case (about $17 per share). A long downturn like 2015-2021, built from SLB's own record: business cash flow of $2.9 billion for two years, like 2020-21 plus ChampionX, then $3.3 billion for five years, then $3.6 billion to year 15. After that it fades to zero by year 25, reflecting the climate-policy and demand risks SLB discloses for oil and gas. The business is worth about $38 billion. Against that SLB owes about $9.5 billion of net debt, about $1.0 billion belongs to the partners in the OneSubsea joint venture, and we assume the pending $4.1 billion Kelvion purchase is worth only half its price ($2.05 billion lost). Shareholders keep about $25.5 billion, or $16.95 per share. Interest costs about $0.6 billion a year, which even the weakest years cover nearly five times. Base case (about $34 per share). Business cash flow dips to $4.3-4.35 billion in the next two years and then returns to the normal $4.5 billion for 25 years. What sustains it is structural: oil and gas wells lose output every year, so producers must keep drilling, maintaining and treating wells just to hold production flat, and ChampionX's chemicals are used up on wells that are already producing. Beyond year 25 we can no longer point to evidence, so cash flow fades to zero by year 40. The business is worth about $62.7 billion. It owes about $9.5 billion of net debt, about $1.6 billion to OneSubsea partners and a $1.0 billion shortfall on Kelvion (valued at 75% of its price). That leaves about $50.5 billion, or $33.56 per share. Bull case (about $46 per share). Activity runs at 2023-2024 levels: about $5.6 billion a year from year three (SLB alone averaged $5.1 billion in 2023-24, plus ChampionX), held for 30 years and then fading to zero by year 45. Kelvion is worth what SLB is paying. The business is worth about $80.8 billion. Less $9.5 billion of net debt and $2.0 billion for OneSubsea partners, that is $69.2 billion, or $45.98 per share. Debt. At June 30, 2026 SLB had $12.8 billion of borrowings ($1.66 billion due within a year) and $4.07 billion of cash and short-term investments. We treat $1.5 billion of that cash as needed to run operations in more than 100 countries. In the first half of 2026 SLB issued new notes at 4.55% (due 2031), 4.80% (2033) and 5.15% (2036). Its average borrowing cost of about 4.5% is below our 6% yardstick, which lowers the effective burden of the debt by about $0.7 billion. SLB is investment-grade and its maturities are spread out, so we see no refinancing problem in any case. A credit guarantee of about $0.6 billion that SLB provided on behalf of its main Mexican customer was due to run off by mid-2026. Kelvion. On August 31, 2026 SLB agreed to acquire Kelvion, a heat-exchanger and data-center cooling maker with about $2.3-2.4 billion of expected 2026 revenue, for about $3.4 billion in cash plus $0.7 billion of assumed debt. The deal is expected to close in the first half of 2027. We treat the $4.1 billion as already committed. Kelvion publishes no audited cash flow we can check, and SLB's large write-downs of the businesses it bought in 2010 and 2016 show it has overpaid before. So we credit Kelvion at 50%, 75% and 100% of its price in the bear, base and bull cases. Changes since our previous analysis. Our earlier work valued SLB at roughly $5.50, $38 and $72 per share. It used different discount rates for each case and assumed growth after year ten. It also deducted only equipment spending and left out spending on production projects and seismic data, which overstated cash flow. It also did not include the Kelvion deal, which was announced after it was written. We now use a single 6% rate, credit no growth that SLB has not already secured, count all capital spending, and subtract the Kelvion commitment. The result raises the bear case, because SLB's post-2020 business has proven sturdier in downturns than the old one, and lowers the base and bull cases. What would make this wrong. A downturn longer or deeper than 2015-2021, a faster fall in oil and gas demand than the 25-40 years we assume, or Kelvion and other data-center purchases turning out to be worth much less than SLB paid would all push value down. Durable success in data centers and digital, or capturing the ChampionX savings, would push it up. None of these is in our numbers. Margin-of-safety price. If the shares move toward the base value of about $33.50 over roughly three years while paying the current $1.18 annual dividend, the base case implies about 20% a year from a price of about $21-22. The bear value of about $17 marks the downside if the downturn drags on. Because the range between cases is wide and this is a cyclical business, the margin-of-safety price is $20.