The initial leaders in a broad energy sector advance are almost always the explorers, and the past couple of years proved no different, especially with the new playbook of limited CapEx, big dividends and big share buybacks, observes Mike Cintolo, editor of Cabot Growth Investor.

But usually, after many months (sometimes longer) of elevated prices, Wall Street begins to favor the equipment and service providers, as the explorers finally loosen their wallets and drilling activity picks up — and this go-round should be more exciting than prior cycles given the prior bust period that saw years of underinvestment.

All of that leads us to Schlumberger (SLB), one of the big boys in the oil service arena, with a wide array of well construction, completion and data-driven exploration tools needed for onshore and offshore drilling, both in the U.S. and overseas; it also has a small but growing New Energy business to ride that area, too.

Business has been picking up, and Q3 was no exception, with sales (up 28%) and earnings (up 75%) easily topping expectations. But the stock went bananas more likely because of the latest conference call, when management doubled down on its view that the long-term outlook is bright.

Plus, Schlumberger itself is gaining share in the sector, which will add fuel to the earnings fire — its international revenue is already higher than (pre-pandemic) 2019, even as rig counts overseas are 25% lower than back then!

Throw in the fact that oil and gas prices remain elevated despite a super-hawkish Fed and pervasive recession fears and investor perception is beginning to price in many years of rapid growth. Indeed, the company just reported its largest EBITDA quarter since 2015 (when the stock was 60% higher than now), and analysts see 38% bottom-line growth next year (likely too low).

Moreover, the stock looks to be just getting going — as of a six weeks ago, shares had made no progress since June 2021, but now SLB has powered to new highs on big volume. Despite its size, we think SLB could be among the next liquid leaders of the energy uptrend.

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