Schlumberger lifted by deepwater rebound, shares rise

Fri Apr 20, 2012 12:03pm EDT

(Reuters) - Schlumberger Ltd (SLB.N), the world's largest oilfield services company, posted a quarterly profit that narrowly topped forecasts as business outside North America and in deepwater regions improved.

The company, whose shares rose more than 4 percent, said it expects more than 10 percent growth this year in the number of rigs working outside of North America, which has been the big profit driver in recent years. Analysts said Schlumberger sounded notably more positive on pricing improvements in international markets.

"The key to the (Schlumberger) story is the acceleration of international and deepwater activity, which should escalate in 2013 and beyond," UBS analyst Angie Sedita said in a note to clients.

Weakness in North American hydraulic fracturing services has been clearly signaled by Schlumberger and others due to pricing pressure in natural gas basins, where activity is slowing. That pressure has now reached liquids-producing areas in the region as well.

"Still, our well-balanced service portfolio on land and our strong leverage towards the Gulf of Mexico put us in a good position to outperform in the North America market," Chief Executive Paal Kibsgaard said.

Oil companies have moved to tap into reservoirs in ever-deeper waters around the globe in recent years, triggering a boom for the service companies and drillers, which can earn billions from the expensive projects.

Schlumberger said on Friday first-quarter net profit rose 39 percent to $1.3 billion, or 97 cents per share, from $944 million, or 69 cents per share, a year earlier. Excluding a one-time charge, its earnings of 98 cents a share came in slightly above the 97 cents estimated on average by analysts, according to Thomson Reuters I/B/E/S.

Revenue rose to $10.6 billion from $8.7 billion a year ago.

Schlumberger extended contracts to work off Brazil, an area that energy companies believe could hold vast amounts oil, and said it was now profitable again in Libya. Kibsgaard said activity there would return to pre-conflict levels early next year.

Second-ranked Halliburton Co (HAL.N) earlier this week defied some of the worst predictions by reporting a higher-than-expected profit, and said it expected the downward pressure on frack pricing to ease later in 2012.

Fracking has been an industry bright spot in recent years as energy companies tapped new U.S. discoveries. But the new sources also created a natural gas glut that has driven down prices for the fuel by more than 60 percent over the past 10 months, "with little likelihood of short-term recovery," Schlumberger said.

Kibsgaard said that liquids production required less pressure pumping horsepower than natural gas, which meant there would be some extra capacity even if the overall North American rig count remained the same.

The outlook for capital expenditures of $4.5 billion this year is unchanged, but Kibsgaard said Schlumberger was already cutting back on pump additions in North America. The degree to which spending would shift elsewhere later this year would depend on how much international demand picks up, he said.

"I don't think a shift from North America to international is going to be a significant problem because the activity level in North America is not really going down. The main issue you have is there is an oversupply of pumps," he said.

Schlumberger shares, which had fallen 19 percent in the past year, climbed 4.6 percent to $73.02 in midday trading on the New York Stock Exchange. Halliburton shares were down 0.9 percent at $33.68, also on the NYSE..

(Reporting by Matt Daily in New York and Vaishnavi Bala in Bangalore; Editing by Lisa Von Ahn, Gerald E. McCormick, M.D. Golan and Steve Orlofsky)