UPDATE 3-Schlumberger profit surges, helped by Middle East & Asia

Fri Jan 17, 2014 10:38am EST

By Ernest Scheyder and Swetha Gopinath

Jan 17 (Reuters) - Schlumberger Ltd, the world's largest oilfield services company, posted a better-than-expected fourth-quarter profit on Friday as robust international activity offset stiff competition in North America.

Fracking, drilling seismic studies and other lucrative services for oil producers across most of the Middle East, Asia and Latin America helped the company's profit top analysts' estimates for the ninth straight quarter.

Intense competition with Halliburton Co and Baker Hughes Inc for work in North America's vast shale fields, though, combined with weak natural gas prices, eroded regional results.

Without strong sales from the U.S. Gulf of Mexico, North American revenue would have dipped.

"The main challenge in the North America land market is still pricing," Chief Executive Paal Kibsgaard said on a conference call with investors.

Negotiations for new contracts with several key North American customers should further dent results, with pricing falling, he said. Statoil and other international energy firms are Schlumberger's largest North American customers and have used the oversupply of oilfield services to their advantage.

Despite tepid North American growth, Schlumberger expects the global economy to improve in 2014 and oil demand to rise, with double-digit earnings growth across the company for the year, Kibsgaard said.

Schlumberger has the lowest exposure to North America among the big four oilfield service providers. International markets brought in about two-thirds of Schlumberger's 2013 revenue of $45.27 billion.

Middle Eastern revenue jumped 5 percent in the quarter, helped by activity in Saudi Arabia and the United Arab Emirates, but a temporary shutdown of operations in southern Iraq in November, following a protest, slightly dented fourth-quarter results, the company said.

Schlumberger suspended activity in Iraq in November after dozens of Shi'ite Muslim workers and tribesmen, accusing a foreign security adviser of insulting their religion, stormed the Schlumberger camp in North Rumaila and wrecked offices.

Seasonal slowdowns in North America, the North Sea, Russia and China also weighed on results.

The company expects oil producers' exploration and production spending, the lion's share of its business, to increase this year for international markets and the U.S. Gulf of Mexico.

Barclays expects oil and gas companies to spend about $723 billion on exploration and production this year, an increase of 6.1 percent from 2013, according to report released last month.

Schlumberger's net income rose to $1.66 billion, or $1.26 per share, in the fourth quarter ended Dec.31, from $1.36 billion, or $1.02 per share, a year earlier.

Excluding items, profit from continuing operations was $1.35 per share.

Revenue rose about 7 percent to $11.91 billion.

Analysts on average had expected earnings of $1.32 per share on revenue of $12.01 billion, according to Thomson Reuters I/B/E/S.

The results come the day after Schlumberger boosted its quarterly dividend by 28 percent to 40 cents.

The company, which reviews its dividend every January, has no set level for future dividend payouts, Kibsgaard said.

"There is no target number," he said.

Baker Hughes and Halliburton are scheduled to report their fourth-quarter results on Jan. 21.

Baker Hughes, considered the smallest of the "big three" oil service providers, earlier this month estimated a smaller-than-expected quarterly profit, citing the suspension of its operations in Iraq.

Schlumberger shares rose 1.1 percent to $89.61 in morning trading on Friday.

Schlumberger shares have risen 21 percent in the past year, compared with a 17 percent rise in the Philadelphia oil service index.

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