Barron's Talked Up Schlumberger This Weekend And Now Shares Are Rallying

In this week's Barron's cover story, Sandra Ward profiles Schlumberger, the oil and gas equipment and services provider, which is set to see profits grow.

Schlumberger, Ward notes, is also focusing more of its efforts on the North American energy market, where smaller rivals Halliburton and Baker Hughes derive more of their profit, with Schlumberger's North American operating profit margin topping that posted by Halliburton during the second quarter.

Schlumberger, the 29th largest component of the S&P 500 with a market cap of $138 billion, is trading at a historical discount to its future earnings expectations, writes Ward.

Bill Herbert of Houston-based investment-banking firm Simmons & Co. told Ward that for Schlumberger, "The value proposition has never been higher," with Hebert seeing the shares gaining more than 30% to $145 per share.

Ward also highlighted some of the company's cost-cutting and capital-return goals:

"Overall, the company is targeting a return of capital of 20% by 2017, up from the current 16%. Capital spending is expected to drop to 10% of revenue from the more typical 12%, which will free up more cash flow to return to shareholders in the form of buybacks and dividends. Indeed, Schlumberger expects to convert 75% of earnings to free cash flow, up from the current level of 55%. An estimated 60% to 65% of that will be given back to shareholders."

Schlumberger CEO Paal Kibsgaard told Ward that Schlumberger isn't focused on being the best-run company in its industry, but said, "We have the potential to be the best-run company in the world, and that's what we are trying to do."

You can read Ward's full profile here.

In pre-market trade, shares of Schlumberger were up 1.6%.