* Schlumberger first-quarter profit $1.21/share vs est.
* Baker Hughes first-quarter adjusted profit $0.84/shr est.
* Both upbeat on Gulf of Mexico deepwater drilling
(Recasts to adds details on outlook risks, new share prices)
By Sayantani Ghosh and Ashutosh Pandey
April 17 Oilfield services providers
Schlumberger Ltd and Baker Hughes Inc each
posted better-than-expected quarterly profit on Thursday, though
they said pockets of weakness loom in Brazil, Canada, Russia and
other drilling regions.
The results highlight a rapidly changing landscape for the
oilfield service industry, where companies are competing for a
smaller number of new contracts in North American shale fields.
At the same time, they are moving into newer, more-lucrative
Eastern Hemisphere regions that have higher logistical risks.
Schlumberger and Baker Hughes, which provide drilling
technology and equipment, well construction services and seismic
surveys for oil and natural gas companies, have for months been
complaining of market weakness in North America.
Additionally, Royal Dutch Shell and other large,
international oil companies, after a decade of double-digit
growth in capital budgets, have begun cutting spending as oil
prices stagnate and project costs rise, a bad sign for oilfield
Executives from Schlumberger, the world's No. 1 oilfield
services company by revenue, and Baker Hughes told analysts on
conference calls they expect results to slightly improve this
year in parts of North America but they warned of potential
problems in other regions.
Schlumberger said deepwater drilling off Brazil should
decline 20 percent this year compared with last year and that
revenue could drop in Russia due to weakness in the rouble. Both
countries are important markets for Schlumberger.
"Brazil revenue for us this year is going to be
significantly down versus 2013," Schlumberger Chief Executive
Officer Paal Kibsgaard said on a call with analysts, citing
slipping demand and less-lucrative contracts signed last year.
Baker Hughes said its revenue this quarter would decline
slightly in North America, where it gets half its annual
revenue, partly due to a slowdown in Canada.
GULF OF MEXICO HOLDS PROMISE
Three years after the worst offshore oil spill in U.S.
history, large oil and gas companies are ramping up operations
in the Gulf of Mexico, which they expect to yield more than
700,000 barrels per day of crude.
"The Gulf of Mexico will play a big role in our North
American margin growth," Baker Hughes Chief Executive Officer
Martin Craighead said.
While Schlumberger's revenue from deepwater drilling in the
region fell in the first quarter due to operational delays, it
expects the situation to normalize this quarter.
"The outlook for deepwater drilling activity in the Gulf of
Mexico remains strong for the full year," Kibsgaard said.
Baker Hughes, which said it had a good first quarter in the
Gulf, expects business in the region to continue to improve and
boost margins particularly in the second half of the year.
The company's North American revenue rose 12 percent to
$3.68 billion in the first quarter. Baker Hughes posted a 7
percent rise in revenue to $2.78 billion from the region.
Baker Hughes' shares rose 4.1 percent to $69.05 in afternoon
Schlumberger's shares, which hit their highest point in
nearly six years on Thursday morning, fell 0.4 percent to
$100.53. The stock has risen about 12 percent in the past month,
outperforming shares of Halliburton Co and Baker Hughes.
In the past few quarters, unusually cold weather in North
America and Russia disrupted drilling, hurting oil and gas
companies while pushing up natural gas prices in North America
and depleted stockpiles to their lowest level since 2003.
Kibsgaard said the fundamentals of the global economic
recovery were intact despite the harsh winter, slowing growth in
China, and problems in Ukraine.
Schlumberger, which cut its 2014 capital spending budget by
about 3 percent to $3.8 billion, said it expected spending on
well-related activity to rise by more than 6 percent this year.
Schlumberger's first-quarter revenue fell short of analysts'
average estimate due to reduced drilling activity and pricing
pressure in Latin America.
Revenue from the region declined 8 percent to $1.76 billion,
the lowest in eight quarters. Latin America accounted for nearly
16 percent of Schlumberger's total sales in the first quarter
ended March 31.
Schlumberger's profit from continuing operations rose 32.5
percent to $1.59 billion, or $1.21 per share, in the first
quarter. Analysts had expected a profit of $1.20 per share.
The company's total revenue rose about 6 percent to $11.24
billion, but missed an average estimate of $11.49 billion,
according to Thomson Reuters I/B/E/S.
Baker Hughes also posted a 10 percent drop in quarterly
revenue from Latin America.
The company's adjusted profit rose 27 percent to 84 cents
per share, while revenue rose nearly 10 percent to $5.73
billion. Analysts on average had expected earnings of 78 cents
on revenue of $5.71 billion.
(Writing by Sayantani Ghosh in Bangalore and Ernest Scheyder in
New York; Editing by Saumyadeb Chakrabarty, Terry Wade and Tom