Schlumberger, Weatherford outlook bright; Q1 tough
SAN FRANCISCO/HOUSTON (Reuters) - Schlumberger Ltd (SLB.N) and Weatherford International Ltd (WFT.N) said the outlook was promising for oilfield services as clients speed up exploration due to the geopolitical shocks lifting oil prices.
The stronger outlook came as they posted earnings pinched by unrest in the Arab world, bad Australian weather and a slow Gulf of Mexico recovery in the year since disaster struck.
John Keller, a Houston-based analyst for financial services firm Stephens, said the North Africa and Middle East tensions were viewed as temporary. "The big international recovery is definitely capturing people's attention," he added.
Among rig contractors, revenue fell at Diamond Offshore Drilling Inc (DO.N), Ensco Plc (ESV.N) and Noble Corp (NE.N), but Diamond's earnings beat estimates with the help of lower costs and a drop in its tax rate.
The rise in oil prices above $110 a barrel has prompted Saudi Arabia to ramp up spending on new fields to raise its output capacity to make up for supplies cut off in Libya.
"The absence of Libyan production worries the oil producers," Schlumberger Chief Executive Andrew Gould said, adding that the shortfall, along with increased oil and gas demand from Japan, would increase global drilling activity.
"I'm much more confident that the international stream will come back faster," the normally cautious executive, who retires as CEO of the oilfield services leader later this year, said on a conference call with investors.
His successor, Paal Kibsgaard, added that a Gulf of Mexico recovery would be "significant" for North American margins.
Schlumberger shares rose 2.2 percent to close at $89.78 on the New York Stock Exchange, as its positive outlook outweighed a lower-than-expected first-quarter profit.
MORE WORK IN SAUDI, MEXICO
Ensco and Noble are submitting bids for some of the extra work in Saudi Arabia, and said Pemex PEMX.UL was seeking eight more rigs in Mexico, supporting shallow-water rig rates.
Also, Bernard Duroc-Danner, the CEO of Schlumberger rival Weatherford WFT.VX, told analysts his company was raising capital spending to take advantage of growing services demand.
Schlumberger's first-quarter profit rose 40 percent to $944 million, or 69 cents per share. Excluding one-time items, it earned 71 cents per share, compared with the 76 cents analysts expected, according to the average on Thomson Reuters I/B/E/S.
Weatherford, the fourth-largest oilfield services company, posted a quarterly profit compared with a loss a year earlier, helped by higher revenue in North America.
But its results fell short of Wall Street estimates, sending its stock down 2.2 percent in New York trading.
Rig contractors were hit hard by fallout from BP Plc's (BP.L) Gulf of Mexico well blow-out a year ago. Many rigs were idled by the U.S. deepwater moratorium and daily rates to hire those vessels fell, with some recovery expected this year.
Diamond saw a 14 percent drop in first-quarter profit, and Noble posted an 85 percent profit drop after the market close on Wednesday, which was lower than forecast.
Ensco reported a profit that was a bit lower than expected, but announced a contract in Brunei for a new deepwater rig that gets it working sooner than expected, at a solid daily rate.
Shares of Diamond and Ensco both rose more than 2 percent, while Noble shares dropped 1.2 percent.
London-based Ensco made a huge splash last quarter with its $7 billion acquisition of Pride International PDE.N, in a deal that should close this quarter.
While Diamond CEO Larry Dickerson welcomed the benefits that mergers delivered for his industry, he did not expect the sector to shrink down to two or three players given that there are low barriers to entry, and few merger savings to extract.
"There's very little premium that you can pay because there's very little cost savings to be had by combining two fleets together," Dickerson said on a conference call.
As for Noble, which Ensco will overtake as the number-two drilling contractor, CEO David Williams told any potential buyers to "bring your checkbook" in order to strike a deal.
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