Schlumberger shares touch new high
HOUSTON (Reuters) - Schlumberger Ltd. (SLB.N), the world's largest oil service company, said on Friday its second-quarter profit rose 47 percent, topping Wall Street expectations, driven by strength in its international markets.
The better-than-expected results prompted investors to push shares of Schlumberger to a all-time intraday high of $97.23 before easing to be up 2.2 percent, or $2.08, at $95.53 in noon trading.
Net profit for the Houston-based company, which provides technology and services to help energy companies drill for oil and gas, rose to $1.26 billion, or $1.02 cents per diluted share, from $857 million, or 69 cents per share, a year earlier.
Analysts on average had expected earnings of 96 cents a share, according to Reuters Estimates.
Still, Schlumberger cautioned that the short-term outlook for its North American business was uncertain due to record imports of liquefied natural gas and continued weakness in Canada.
"Second-quarter results were driven by the increasing pace of international activity," said Schlumberger Chairman and CEO Andrew Gould.
"Sequential revenue growth for Oilfield Services accelerated in all areas except North America, where higher activity on land and in the Gulf Coast was not sufficient to completely offset a significant downturn in Canada," he said.
The company had an "exceptional" performance in the Middle East and Asia, citing a favorable revenue mix from exploration services, Gould noted. He said global oil demand remains robust.
Even so, on a conference call with analysts, Gould said he did not know if the Canadian drilling market would eventually recover in 2007 or 2008.
Schlumberger, the first big oil service company to report its second-quarter earnings, has set the bar high for peers like Baker Hughes Inc. (BHI.N), which recently warned that deterioration of its Canadian business would hurt profitability in the second quarter.
By contrast, Schlumberger had beat Wall Street expectations by an average of about 9 percent for 10 consecutive quarters, according to Pickering Energy Partners. The 2007 second-quarter results make it 11 quarters in a row.
"Even though North America is a little bit volatile, it is going to be more than offset by international growth," said Poe Fratt, analyst at A.G. Edwards. He added that investors would be encouraged by Schlumberger's margin expansion in its oil services business.
Total revenue climbed to $5.64 billion from $4.69 billion in the same quarter a year earlier. Analysts had expected revenue of $5.58 billion.
Oilfield Services revenue climbed 21 percent to $4.97 billion, while pretax operating income rose 33 percent from a year earlier to $1.51 billion.
Schlumberger's seismic unit WesternGeco recorded revenue of $665 million, an increase of 18 year-on-year. Pretax business operating income for the unit rose 28 percent to $216 million.
So far this year, shares of Schlumberger have risen about 48 percent, outperforming the Philadelphia Oil Service Index .OSX, which is up about 40 percent. The gains in shares of Schlumberger helped pull the oil services index to a fresh all-time high of 282.01 on Friday.
