(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 company predicted.
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 Orleans.
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 Reuters I/B/E/S.
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)