Oilfield services leader Schlumberger (SLB.N) reported a higher-than-expected rise in fourth-quarter earnings and remained cautiously optimistic about 2012 despite the potential for Europe's debt crisis to hurt economic growth and oil demand.
Schlumberger shares were up less than 1 percent, coming off a six-week high earlier in the day, after Chief Executive Officer Paal Kibsgaard warned that analysts' first-quarter profit expectations were on the "optimistic side."
A similar warning from the new CEO three months ago knocked 10 cents off fourth-quarter estimates. The current average first-quarter earnings estimate for Schlumberger is $1.07 per share, according to Thomson Reuters I/B/E/S.
The company gave no full-year earnings forecast despite requests from an analyst on a conference call.
The International Energy Agency cut its oil demand forecast this week, saying the possibility of a credit crunch in Europe could set off a recession that would cut energy consumption.
European gloom also weighed on the minds of the management at General Electric Co (GE.N), which posted lower-than-expected revenue on Friday.
Oilfield service companies have benefited from strong oil prices, which have prompted their energy-producing customers to hike spending by about 10 percent this year, according to a survey by Barclays Capital.
"Against this backdrop, we are planning for growth in 2012, although we are building significant flexibility into our plans, given the uncertainties," Kibsgaard said on the conference call.
So while Schlumberger expects 2012 capital spending to rise 12 percent to nearly $4.5 billion this year, it said it was building the "required flexibility" into those plans.
"This is code for throttling back on spending, at a minimum, if warranted," according to Simmons & Co analyst Bill Herbert.
Fourth-quarter net profit rose to $1.4 billion, or $1.05 per share, from $1.0 billion, or 76 cents per share, a year earlier. Excluding one-time items, earnings per share of $1.11 topped the $1.09 that analysts had expected on average.
Revenue rose 21 percent to $11 billion.
North American growth was driven by work in the deepwater Gulf of Mexico, where activity is increasing after the 2010 BP Plc (BP.L) oil spill brought drilling there to a standstill.
Kibsgaard expects about one deepwater rig per month, on average, to move in to the Gulf of Mexico in 2012, with the rig count there topping the level seen prior to the BP disaster later in the year.
Ensco Plc (ESV.N) said late on Thursday that one of its deepwater rigs would return to work in the Gulf of Mexico for BP after its sublet contract in Angola runs out in July.
Offshore activity in Africa and land business in the Middle East and North Africa were also strong, Schlumberger said.
Analysts at Pritchard Capital said positive commentary on Iraq was a surprise, given recent chatter about activity there. "We think these results internationally augur well for other companies with large exposure outside North America, specifically Weatherford WFT.S," they added.
Rivals Halliburton Co (HAL.N) and Baker Hughes Inc (BHI.N), which are more U.S.-focused, report results on Monday and Tuesday, respectively. Weatherford's numbers are due on February 21.
Schlumberger said recent price rises that boosted the North American onshore business had slowed from the third quarter, but it was sticking with plans to build more hydraulic fracturing capacity, for now.
U.S. drilling has boomed in recent years with increased production from shale rock formations through "fracking," which has been a boon for Schlumberger, Halliburton and Baker Hughes.
But apart from the political fallout due to environmental concerns, all that drilling has also created a glut of natural gas. This has pushed prices for the fuel to its lowest levels in a decade, causing drilling activity to decline.
Kibsgaard expected the onshore North American rig count to remain about flat this year, with growth in oil basins offsetting the decline in natural gas drilling.
Schlumberger shares were up 0.6 percent at $73.31 in midday trading after rising as high as $75.75 early on Friday.
(Reporting by Matt Daily in New York, Krishna N Das in Bangalore and Braden Reddall in San Francisco; Editing by Lisa Von Ahn)