July 19, 2013 / 12:45 PM / 5 years ago

WRAPUP 1-Schlumberger soars on global drilling boom, Baker hit at home

* Schlumberger Q2 EPS $1.15 vs estimate $1.10
    * Baker Hughes profit down 45 pct, CEO see rebound
    * Schlumberger shares up 2 pct in premarket trading

    By Braden Reddall
    July 19 (Reuters) - A three-decade high for drilling
activity outside North America lifted Schlumberger Ltd 
to its seventh straight estimate-topping quarterly profit, while
U.S.-focused Baker Hughes Inc came up short in a tough
quarter at home.
    Shares of global oil services sector leader Schlumberger
rose 4 percent to $81.69 in trading before the New York Stock
Exchange opened on Friday, while Baker Hughes slipped 2 percent
to $48.
    UBS analyst Angie Sedita was impressed by Schlumberger's
strong execution in almost every region. "Additionally positive
data points for continued strength in the international and
deepwater markets support strong growth in the years ahead," she
wrote in an investor note.
    Schlumberger said second-quarter net income rose 49 percent
to $2.1 billion, or $1.57 per share, in the second quarter, from
$1.4 billion, or $1.05 per share, a year earlier. Excluding
certain items, its profit was $1.15 per share, whereas analysts
had expected $1.10, according to Thomson Reuters I/B/E/S. 
    Schlumberger, which makes more than two-thirds of its
revenue outside North America, is better insulated from the
uncertain oilfield market in the home country of rivals
Halliburton Co and Baker Hughes over the rest of 2013.
    Exploration and drilling activity rebounded in China and
Australia and growth continued in the key markets of Saudi
Arabia and Iraq, Schlumberger Chief Executive Paal Kibsgaard
    U.S. natural gas prices have remained weak due to excess
supply from shale fields. But both Schlumberger and Baker Hughes
said strong drilling activity in the Gulf of Mexico and improved
deployment of U.S. hydraulic fracturing equipment drove revenue
growth in North America.
    And the near-term U.S. outlook is positive, with Barclays
this week tallying a 4 percent rise in drilling permits in June
in the 30 states it surveys, even though analysts sense drilling
budgets could come under pressure before year-end. 
    Baker Hughes CEO Martin Craighead said he expected a strong
rebound in North American operating margins in the third quarter
as activity in Canada returns to normal. 
    In Canada, Baker's revenues and profits declined
significantly as rig counts dropped to the lowest levels in four
years in the annual spring slowdown as melting ice disrupts
oilfield activity.
    Baker reported a 45 percent fall in second-quarter profit on
Friday, mainly due to weak margins in North America.
    The U.S. gas-directed rig count fell to an 18-year low of
353 in June, while the rig count outside North America climbed
to 1,333, the highest level in 30 years, according to data
compiled by Baker Hughes. 
    Net income for Baker Hughes fell to $240 million, or 54
cents per share, for the quarter ended June 30. Excluding
certain items, earnings were 61 cents per share, below analysts'
expectation of 65 cents. Revenue rose 3 percent to $5.5 billion.
    Shares of Schlumberger and Baker Hughes have risen about 10
percent in the past three months. Shares of Halliburton, which
reports earnings on Monday, have risen 19 percent on news the
company may settle its liability related to the 2010 Gulf of
Mexico oil spill.
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