Schlumberger (SLB.N), the world's largest oilfield services company, posted a lower-than-expected third-quarter profit and acknowledged that financial turmoil would dampen near-term earnings, sending its shares down 1 percent.
Oil prices are down from their second-quarter peak, raising concerns that energy companies may trim spending on new wells. But Schlumberger said growing demand for offshore drilling would help its business. The company is also getting a boost from activity in Iraq, Saudi Arabia, Mexico and Brazil.
Paal Kibsgaard, Schlumberger's new chief executive, described Wall Street estimates for fourth-quarter profits, which average $1.19 per share, as "on the optimistic side."
Analysts said the company had tried to cool expectations for the third quarter too, but the hints went largely unheeded. A surge in offshore drilling, however, along with all the growth outside North America, underpinned a good 2012 outlook.
"While the financial turmoil introduces some uncertainty over near-term activity, it has yet to have an impact on the actual activity of our customers," Kibsgaard told analysts on a call, anticipating that any reductions would be "short-lived."
Third-quarter profits were hurt by significant delays in start-ups on Middle East land-based seismic surveys, which clients use as a visual guide to drilling, Schlumberger said.
"Beyond that, its outlook for the service industry remains very positive," said Bill Conroy, head of research at Houston-based Pritchard Capital.
RISKS FOR SHALE PRICING
North American profits topped expectations, driven by drilling in shale fields. Kibsgaard said the main concerns in that area were around a potential slide in prices for pressure pumping as more equipment is built to serve the market.
Overall, Schlumberger's third-quarter net profit fell to $1.3 billion, or 96 cents a share, from $1.7 billion, or $1.38 a share, a year earlier, when it recorded a gain of nearly $1 per share on the increased value of M-I Swaco after buying Smith International, its partner in the joint venture.
Excluding one-time items, Schlumberger earned 98 cents per share, below an average forecast of $1.01, according to Thomson Reuters I/B/E/S. Revenue rose 49 percent to $10.23 billion.
The quarter also included a handover of the CEO mantle to 44-year-old Kibsgaard from Andrew Gould, a respected industry figure who remains chairman but is due to retire this year.
Asked about the global oil market, Gould did not see a risk of disruption from fresh oil supplies, and noted the demand impact of recent uncertainty was "not particularly powerful."
"I don't see that supply could change the picture in the short term," he said, adding that he might "come and say goodbye" on the January conference call.
On Monday, rival Halliburton Co (HAL.N) posted a better-than-expected quarterly profit, but its less assured view of North American prospects led investors to hammer down its shares.
Schlumberger shares were down 1 percent at $67.23 in afternoon trading, while higher oil prices lifted the Philadelphia oil service index .OSX by more than 1 percent.
As of Thursday, Schlumberger's shares were down 23 percent in the past six months, while Halliburton was down 31 percent, both tracking the sector in response to weaker oil prices.
Smaller rival Weatherford International Ltd WFT.S (WFT.N) reports earnings next Tuesday, following by No. 3 player Baker Hughes Inc (BHI.N) a week after that.
(Reporting by Matt Daily and Braden Reddall; Editing by Gerald E. McCormick and Derek Caney)