Schlumberger CEO: International Oil Services Revenue to Grow 20% or More

NEW YORK (Dow Jones Newswires), July 18, 2008

Oilfield-services demand will grow internationally through 2009, Schlumberger Ltd. (SLB) Chief Executive Andrew Gould said Friday.

International revenue growth will top 20% next year, Gould said in a conference call with analysts. Service companies will benefit from the delivery of new offshore rigs around the world, including 35 in the second half of 2008 alone, he said. Schlumberger is the world's largest oilfield-services company by market capitalization.

Offshore growth will be strongest in the North Sea and West Africa, with Russia leading gains on land, Gould said.

Schlumberger reported net income of $1.16 a share on revenue of $6.75 billion for its second quarter, up from $1.02 a share a year earlier and topping the average analyst forecast of $1.12 a share. The company's stock was up $5.4% at $102 in recent trading.

Schlumberger and other service companies have benefitted for years as increasing oil and gas prices have encouraged energy companies to spend more on exploration and production. Offshore activity is particularly lucrative, with producers spending $100 million on a single well in some regions. Producers have been limited this year by a lack of available rigs, but Gould and others in the industry expect an increase in drilling activity - and therefore oilfield-service sector profits - next year.

Gould's outlook for the U.S. and Canada was more positive than earlier in the year, but less sure than the international forecast.

"The uncertainty around the direction of natural gas drilling in North America has been removed," Gould said.

North America has been a sore spot for most service companies over the last year. Producer spending plateaued in 2007 as gas prices stabilized, leading to falling margins for service companies. Gas spent most of the quarter above $10 a million British thermal units, enough to encourage producers to increase their budgets on the continent. Gas recently traded at $10.720.

Gould sees both the U.S. and Canadian markets improving for the rest of 2008, with Canada's recovery extending at least through the first quarter of 2009.

"I'm just not prepared to take a definitive position for the whole of North America land for next year yet," Gould said.

Schlumberger was the first large oilfield-services company to report second-quarter earnings, and its solid performance bodes well for the rest of the sector, wrote Stephen Gengaro, an analyst with Jefferies & Co.

"Companies with meaningful domestic exposure are most likely to see upward EPS revisions in late 2008 and 2009," he wrote, with Halliburton Co. (HAL), BJ Services Co. (BJS), Cameron International Corp. (CAM), Complete Production Services Inc. (CPX) and Superior Well Services Inc. (SWSI) among the likely winners. 

 Copyright (c) 2008 Dow Jones & Company, Inc.

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