Schlumberger profit drops, shares bounce off lows

By Matt Daily and Braden Reddall

NEW YORK/SAN FRANCISCO (Reuters) - Schlumberger Ltd (SLB.N) said on Friday profits sank and warned of spending cuts by customers in 2009, but its stock bounced off 3-1/2-year lows as investors expect the oilfield services leader to weather the turmoil well.

Schlumberger shares, having drastically underperformed peers so far in 2009, were up 7.3 percent around midday.

The company had warned last month that profit would fall short of estimates as sharp drops in energy prices since July led oil and gas producers to rein in spending on new projects.

Its WesternGeco unit, which measures prospective oil and gas reservoirs, had a particularly bad quarter, as expected.

But Longdley Zephirin, oil services analyst at Zephirin Group Inc, said the market welcomed Schlumberger's traditionally careful approach to the downturn. "Their general tone hasn't changed in recent quarters," he said.

Tudor Pickering Holt analysts said the results were not good, but not a disaster, and S&P kept a "buy" on the stock.

Energy analysts have forecast spending by oil and gas producers would drop by one-fifth or more in 2009 as companies move to conserve cash, and Schlumberger echoed that sentiment.

"We expect 2009 activity to weaken across the board with the most significant declines occurring in North American gas drilling, Russian oil production enhancement and in mature offshore basins," Chief Executive Andrew Gould said.

Gould told investors on a conference call that the company was cutting 5,000 jobs out of 87,000 worldwide, and did not rule out more cuts in the first half of 2009, if necessary.

Net profit fell to $1.15 billion, or 95 cents per share, down from $1.38 billion, or $1.12 per share, although revenue rose nearly 10 percent to $6.87 billion.

Excluding charges and credits, it earned $1.24 billion, or $1.03 per share, a penny short of the average analyst forecast, on revenue of $6.84 billion, according to Reuters Estimates.

Shares of rivals Halliburton Co (HAL.N) and Weatherford International Ltd (WFT.N), both expected to report quarterly earnings on Monday, rose 6 and 8 percent, respectively.

WAITING FOR COST INFLATION TO COOL

Developing most new oil and gas fields was uneconomical at current prices, and it would take time for inflation that has driven exploration and production costs to abate, Gould said

Still, despite heavy spending to develop new resources in recent years, the supply situation has not improved much and investment cuts now would "sow the seeds of a strong rebound."