Schlumberger profit rises, but lags forecasts

By Matt Daily and Anna Driver

NEW YORK/HOUSTON (Reuters) - Schlumberger Ltd (SLB.N), the world's largest oilfield services company, posted a 22 percent rise in fourth-quarter profit on Friday but missed Wall Street forecasts because of weakness in its U.S. onshore market.

The company also reined in investor expectations for revenue growth in its international business in 2008, which pushed shares down more than 8 percent.

North American oilfield services revenue decreased 7 percent to $1.33 billion, and earnings for the region dropped 23 percent to $338 million as prices for the company's U.S. pressure pumping services fell.

Pressure pumping is a process used to extract natural gas from hard to reach pockets in substances like shale. High energy prices lured a number of smaller players to the market in 2007, resulting in oversupply and pricing weakness.

"I'd call it a soft quarter. The overall outlook is relatively unchanged, but the near-term financial performance was a little disappointing," said Dan Pickering of Tudor, Pickering, Holt & Co Securities in Houston.

Pretax margin in North America fell to 25.4 percent from about 30 percent a year ago. But on a conference call with analysts, Schlumberger Chief Executive Andrew Gould said the "precipitous" decline in profit margin would stop in 2008.

Schlumberger's overall profit rose to $1.38 billion, or $1.12 per share, from $1.13 billion, or 92 cents per share, a year earlier. Excluding special items, earnings were $1.11 per share, lagging the $1.13 that analysts had expected, according to Reuters Estimates.

Revenue climbed to $6.25 billion from $5.35 billion, beating the analysts' forecast of $6.1 billion.

Higher start-up costs for 17 drilling rigs set to begin work on the Mezosoico and Alianza projects in Mexico under Schlumberger's integrated project management business (IPM) also cut into margins.

Shares of Schlumberger fell 8.3 percent to $75.63 in late morning trade on the New York Stock Exchange, extending the 16 percent decline the stock has suffered since the beginning of January through Thursday's close.

The broader Philadelphia Oilservice Index .OIX has dropped nearly 13 percent so far this year.

INTERNATIONAL UP

Strong demand for the company's oilfield services in Latin America and the Eastern Hemisphere boosted Schlumberger's international results, but CEO Gould warned on a conference call that Wall Street's view of growth in 2008 was too rosy.

"I'm concerned that generally, the assumption of the company's international top-line growth is too high," Gould told analysts.

Gould forecast revenue growth in the "teens," or less than 20 percent.