A 98-Year-Old Oil Company is Becoming an AI-enabled Tech Company

Today I'm looking SLB (used to be called Schlumberger). They're the world's biggest oil services company.

Given that they offer a lot of different oil field services, I made up a one-elevator pitch for what they do: They turn their customer's geological uncertainty into predictable cash flow

They accomplish this via the following jobs-to-be-done.

Finding & Understanding

• Find oil deposits underground

• Map reservoir size and quality

• Identify the best drilling locations

• Analyze rock formations before drilling

Drilling Operations

• Drill wells without getting stuck

• Navigate to exact underground targets

• Drill faster and cheaper

• Avoid blowouts and accidents

Production & Extraction

• Extract more oil from each well (30% vs natural 5%)

• Keep old wells producing longer

• Pump oil from deep underground

• Separate oil, gas, and water efficiently

Data & Decision Making

• Turn sensor data into drilling decisions

• Predict equipment failures before they happen

• Optimize production across hundreds of wells

• Model reservoirs digitally before drilling

Complex Environments

• Operate in deepwater (2+ miles underwater)

• Extract from high-pressure formations

• Work in Arctic conditions

• Handle corrosive/toxic environments

Compliance & Sustainability

• Monitor and reduce methane emissions

• Meet environmental regulations

• Capture and store carbon

• Report ESG metrics accurately

Integration & Efficiency

• Make equipment from different vendors work together

• Reduce downtime between operations

• Coordinate complex multi-well projects

• Provide single point of accountability

The ultimate job: Turn geological guesswork into predictable profits

They've done a great job of accelerating North America's energy independence. But they have also fallen victim to the commodity price roller coaster on which they are forced to ride.

The expensive lesson about market timing

Oil prices go up and down like a roller coaster. Everyone knows this. Yet SLB bought one of their biggest competitors when oil was at record highs:

• 2010: Bought Smith International for $11.3 billion (oil at $80+)

While this single acquisition isn't that big of a deal, it give me an opportunity to stand on my soapbox and talk about how hard it is to not "buy high".

Why smart companies make dumb timing decisions

What happens during boom times:

• Everyone's making money

• Competitors look like geniuses

• "This time is different" becomes the motto

• CEOs get FOMO (fear of missing out)

• Boards approve crazy prices because "strategic fit"

What happens next:

• The cycle turns (it always does)

• Prices crash

• Those "strategic" acquisitions can become boat anchors

• Billions get written off

• Everyone pretends they saw it coming

With all of that said, Schlumberger is a hell of an impressive business with formidable data, technology and brand moats. I couldn't help but dive into the market timing lesson.

That's a long enough intro for today!

I'll see you tomorrow.

Nick

TL;DR

• What they do: World's largest oilfield services company ($36B revenue) providing drilling, production, and digital solutions to oil & gas companies globally

• Key insight: Technical brilliance doesn't guarantee strategic wisdom. They have built an impressive competitive moat while destroying $20B through poorly-timed acquisitions

• Entrepreneurial lessons: Dominate through technology and global scale, but avoid buying unrelated businesses at market peaks. Their pivot from oil services to "energy technology" shows how century-old companies can reinvent themselves

The 30,000-Foot View

SLB operates as the tech-enabled arms dealer to the oil industry through four divisions: Well Construction (36% of revenue, 22% margins), Production Systems (34%, 15% margins), Reservoir Performance (20%, 20% margins), and Digital & Integration (12%, 33% margins). The company generates 81% of revenue internationally with 110,000 employees across 100+ countries.

• Market cap: $48 billion

• TTM revenue: $36.1 billion

• Gross margin: 19.8%

• Net income: $4.6 billion

• Employee count: 110,000

• Industry: Energy Equipment & Services

Company History

• 1927: Brothers Conrad and Marcel Schlumberger invent electric well logging in France

• 1940: Headquarters moves to Houston

• 1962: Listed on NYSE

• 1979-1987: Disastrous Fairchild Semiconductor acquisition ($425M purchase, $220M loss)

• 2010: Acquires Smith International for $11.3B, becoming services leader

• 2016: Cameron International acquisition for $14.8B

• 2019: Takes $11.4B writedown on acquisitions

• 2022: Rebrands as SLB, commits to net-zero by 2050

• 2024: Announces ChampionX acquisition for $7.8B

Show Me the Money

Stand-out financial features:

• Digital revenue growing 20% to $2.44B with 33% margins

• Free cash flow of $3.8B annually

• Net debt/EBITDA of just 0.95x

• Returning $4.1B to shareholders through dividends and buybacks

• CapEx running at only 4.5% of revenue despite global operations

Financial Data

The N.O.O.B. Nine — Competitive Powers

The Nerd Out on Business Nine is made up of Hamliton Helmer's famous "7 Powers" of competitive advantage (Scale Economies, Network Economies, Counter-Positioning, Switching Costs, Branding, Cornered Resource, and Process Power) combined with two of my own (Data Flywheel and Distribution Advantage).

Average Score: 4.1/5 - SLB has built a formidable strategic moat through scale, data, and global relationships.

Memorable Marketing

SLB's 2022 rebrand from Schlumberger demonstrates B2B marketing excellence. Working with Brandpie over 18 months, they unified 100+ sub-brands under one identity while repositioning from oil services to energy technology. The new logo is based on the carbon budget curve needed to reach net-zero emissions.

Key campaigns:

• "For a Balanced Planet" (2022): Complete corporate rebrand with environmental positioning, first oilfield services company to commit to net-zero by 2050

• "Big Health Energy" (2022): Internal engagement campaign that pivoted mid-stream during rebrand while maintaining employee buy-in

• Industry Thought Leadership: CEO keynotes at ADIPEC, OTC positioning company as energy transition leader

• Transition Technologies Portfolio: Quantified customer emissions reductions (80,000 tons CO2) equivalent to removing 18,000 cars

Tactical Takeaways:

• Time rebrands with substantive business changes (net-zero commitment)

• Unite scattered sub-brands for stronger market presence

• Position CEO as industry spokesperson on transformation

• Quantify environmental impact for credibility

AI Uses & Opportunities

Current AI implementations:

• Neuro autonomous geosteering making real-time drilling decisions

• Lumi AI platform integrating generative AI across energy value chain

• DELFI cognitive E&P environment processing data from 5M wells

• Partnership with NVIDIA (since 2008) for AI computing infrastructure

Future AI opportunities:

• Predictive maintenance across 120-country operations

• Automated reservoir modeling reducing exploration costs

• Real-time production optimization using edge computing

• AI-driven energy transition solutions for carbon capture/storage

Bumps in the Road

• $232.7M sanctions violation (2015): Largest-ever penalty for Iran/Sudan trade violations using code names like "Northern Gulf"

• $11.4B acquisition writedown (2019): Cameron and Smith acquisitions destroyed massive value through poor timing

• Lost radioactive materials: Multiple incidents including 61kg canister in Australian outback

• $100M gender discrimination lawsuit (2020): Policy requiring women to "politely confront harassers" exposed cultural blindness

• 21,000 layoffs (2020): COVID-19 forced massive restructuring

• Failed diversification: Fairchild Semiconductor ($220M loss) and Sema ($5.2B) acquisitions proved oil expertise doesn't transfer

Your Swipe File

Positive lessons to copy:

• Build switching costs through technical integration - Their systems become so embedded that changing vendors means rebuilding infrastructure

• Own the data layer - Every service generates data that improves AI models, creating compounding advantage

• Go international early - 81% international revenue with better margins than domestic

• Maintain R&D through cycles - Cut 21,000 jobs but kept innovation spending constant

Negative lessons to avoid:

• Don't buy businesses you don't understand - Semiconductor manufacturing has nothing to do with drilling oil

• Culture blindness costs billions - Sanctions violations and harassment lawsuits from arrogance

• Diversification often fails - Stick to your core competency rather than chasing unrelated growth