NEW YORK/SAN FRANCISCO Schlumberger Ltd (SLB.N) beat estimates with a 64 percent jump in profit on strong U.S. demand and deepwater drilling, while international activity showed clear signs of improvement after a long wait.
Schlumberger shares rose 3 percent in early trading, as the world's largest oilfield services company delivered its first set of market-pleasing results this year.
The stronger North American trend drove an estimate-beating 54 percent jump in earnings for rival Halliburton Co (HAL.N) this week, though Halliburton shares were little changed on Friday.
While half of Halliburton's revenue comes from Canada and the United States, the region accounts for less than a third for Schlumberger, which sees big improvements elsewhere led by a dramatic increase in Saudi Arabian activity.
"None of the other countries are executing with the speed of Saudi. So yes, it's going to come, but it's not there yet," Chief Executive Andrew Gould said on a call with analysts -- his last before he retires as CEO and hands off the top job to 44-year-old Paal Kibsgaard.
Iraq is also a key factor in the improving international outlook, along with the North Sea and East Asia, he added.
Asked about Iraq, where many oil firms have found it hard to establish a foothold, Kibsgaard said it is likely to be Schlumberger's seventh biggest out of 14 markets in the Middle East and Asia, before improving to No. 3 next year.
Oil and gas companies' spending picked up far more quickly in North America than elsewhere this year as oil prices surged and producers rushed to tap fields rich in liquids.
Schlumberger said onshore U.S. strength and demand from the world's deepwater regions drove second-quarter earnings, while Gulf of Mexico activity was improving after the drilling halt that followed last year's BP Plc (BP.L) Macondo oil spill.
PROFIT PLEASES WALL ST.
Second-quarter profit rose to $1.34 billion, or 98 cents a share, from $818 million, or 68 cents a share, a year earlier.
Leaving out one-time items, Schlumberger earned 87 cents a share from continuing operations, topping the analysts' average forecast of 85 cents as compiled by Thomson Reuters I/B/E/S.
Revenue rose 62 percent to $9.6 billion, topping the $9.2 billion that analysts had expected.
The strong North American performance offset disappointing earnings in Europe, the former Soviet states and the Middle East, UBS analyst Angie Sedita said, though she also saw high energy prices eventually driving those businesses as well.
"Schlumberger offers the best play on the international ... and deepwater markets, which should slowly start to improve later this year, with greater gains in 2012," Sedita said in a note to investors.
Gould expressed optimism about deepwater in particular, a view supported by the dozens of new rigs in the pipeline.
"There have never been so many deepwater rigs on order. So to the extent that we have exploration success in deepwater ... I think that the exploration cycle can be a lot more sustained than it was last time, when it was abruptly terminated by the financial crisis and by the Macondo incident," he said.
Gould also said the steep ramp-up in demand for services in the U.S. market and elsewhere is straining the sector, making it difficult to get equipment and staff to customers.
Shares in Schlumberger climbed 3.3 percent to $93.93 in morning trading. At Thursday's close, the stock had gained 9 percent so far this year, lagging a near-12 percent rise in the Philadelphia Stock Exchange Oil Service Index .OSX.
The improving global outlook gave a 2.6 percent boost to shares of Weatherford International Ltd (WFT.N), which is making a big push outside the United States, while U.S.-geared Baker Hughes Inc (BHI.N) fell 0.8 percent.