Schlumberger 3Q Net Rises 9.5% on Higher International Revenue

Schlumberger Ltd.'s third-quarter earnings rose 9.5% as the oilfield-services provider continued to see increased drilling activity overseas, offsetting weakening profits in North America.

The world's largest oilfield-services company reported a profit of $1.42 billion, or $1.07 a share, up from $1.3 billion, or 96 cents a share, a year earlier. Excluding charges and credits, adjusted earnings from continuing operations rose to $1.08 from 96 cents. Revenue jumped 11% to $10.6 billion. Analysts polled by Thomson Reuters most recently forecast earnings of $1.06 a share on revenue of $10.68 billion.

Schlumberger's massive international presence allowed it to buck the trend followed by rivals Halliburton Co. and Baker Hughes Inc., which saw their profits drop as exploration and production companies in North America pulled back on drilling activity in an effort to stretch capital budgets throughout the end of the year. Prices for pressure-pumping services, a key component of hydraulic fracturing, are also suffering because of excess supply. Baker Hughes, which also posted results Friday, saw its profits drop 60% to $279 million, or 63 cents a share, coming well under Wall Street expectations of 84 cents a share.

Schlumberger shares traded at $74.40, down 0.52%. Baker Hughes shares traded down 4.96% at $44.76.

Hurricane Isaac and slow seasonal recovery in Canada also impacted oilfield-services providers' North American bottom line, and Schlumberger was no exception. Its third-quarter North America revenue of $3.29 billion was down 2.3% from the second quarter.

But international operations, where Schlumberger earns about 70% of its revenue, carried the day. Schlumberger's international revenue rose 3% from last quarter, with the Middle East and Asia posting a nearly 7% increase in revenue.

Analysts with Simmons & Co. said that Schlumberger's third-quarter performance was "solid, predictable, reliable," with a commendable performance in North America and "nicely improved" international revenue.

Schlumberger's Chief Executive Paal Kibsgaard told analysts during an earnings conference call that he is optimistic about international-oil and gas-activity growth, expecting a tight global supply and demand balance to make up for macroeconomic uncertainty.

"In the international market we have seen no material change to overall customer activity plans or sentiments during the quarter, and we still expect our activity to grow in excess of 10% this year," Mr. Kibsgaard said.

The company fared better in North America than many competitors, analysts said. While the company "can't dodge the downward pressure," margins and revenue held up "a hair better than we forecast," Tudor, Pickering, Holt & Co. analysts wrote in a note Friday.

Mr. Kibsgaard said lower prices for hydraulic fracturing services are working their way into new contracts as drilling activity slows down. As of earlier this month, the number of rigs operating in the U.S. had fallen to 1,835--down 188 from last year, according to the Baker Hughes rig count. In Canada there were 361 rigs working, down 151 from last year.

Mr. Kibsgaard said that in North America, oil drilling activity was no longer able to offset the drop in natural gas-directed activity, but the Gulf of Mexico constituted a bright spot, with the number of rigs working there on track to reach pre-Deepwater Horizon levels by the end of the year.

Copyright (c) 2012 Dow Jones & Company, Inc.


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