(Adds background on rig count, earnings; updates shares)
By Braden Reddall
March 18 Schlumberger Ltd, the world's
largest oilfield services company, warned on Monday that North
American activity was weaker than expected in the first quarter
as U.S. drillers returned to work at a slower pace than the
Shares of Schlumberger fell 2.6 percent to $77.34 in morning
trading on the New York Stock Exchange.
Schlumberger Chief Executive Paal Kibsgaard on Monday said
asset utilization recovered from a holiday slowdown and that the
lower cost of a key hydraulic fracturing ingredient, guar, was
providing some relief. But pricing remains the fundamental
issue, he added.
"We continue to see negative pricing pressure in many
product lines in the first quarter, with active participation
from our principal competitors, reinforcing the somewhat unclear
outlook for the North America land market at this stage," he
said in a speech at the Howard Weil energy conference in New
Schlumberger, with an extensive international reach, is less
exposed to North America than rivals Halliburton Co and
Baker Hughes Inc.
The North American natural gas glut has forced many drillers
to shut down rigs until gas prices recover. Kibsgaard raised a
few eyebrows among analysts with a prediction in January that
between 100 and 150 U.S. rigs could go back to work in the first
quarter - a quicker recovery than many others had anticipated.
As of the end of last week, the total number of U.S. rigs
working had increased by 13 so far in the first quarter to
1,776, according to a closely watched tally by Baker Hughes.
Analysts at Tudor Pickering Holt said on Monday the rig
count looked to be generally trending higher given "healthy
crude oil prices" and the natural gas rig count bottoming out,
and they saw oilfield services stocks as a good bet over this
year even if they were "ripe for a short-term breather."
Looking offshore, Kibsgaard said on Monday that Gulf of
Mexico activity had been temporarily affected by the replacement
of subsea connector bolts on some rigs there. Last month, U.S.
regulators told rig contractors to inspect the bolts, made by
General Electric Co, after a leak.
Schlumberger maintained its goal of double-digit earnings
growth for 2013, assuming North America land activity and
pricing levels come in line with expectations and that it
reaches a solution in Venezuela, where it saw a significant
slowdown in the rates of payments by customers last quarter.
Analysts had been expecting earnings per share growth of 14
percent to $4.74 in 2013, according to the average on Thomson
Among international markets, Kibsgaard highlighted Saudi
Arabia, Iraq, Russia, China and Africa. The Saudi rig count
would reach 170 by the end of this year, he said, raising the
estimate by 10 rigs from his forecast in January.
In Iraq, where the oilfield services industry has been
investing for years in anticipation of growth, Kibsgaard
expected 2013 revenue of $600 million and good profitability.
As for all the unconventional resources unlocked by
hydraulic fracturing, he said North America would remain the
center of activity, especially in oil, and the short-term focus
outside the region would be on pilot projects. "Activity and
production will likely start to become more meaningful in the
second half of this decade," he said of global unconventionals.
(Reporting by Braden Reddall in San Francisco; Editing by
Gerald E. McCormick, Maureen Bavdek and Andrew Hay)