July 20 (Bloomberg) -- Schlumberger Ltd., the world's largest oilfield-services provider, said second-quarter profit rose 47 percent on increased drilling by oil and gas producers seeking to replenish reserves.

Net income rose to $1.26 billion, or $1.02 a share, from $856.9 million, or 69 cents, a year earlier, Schlumberger said in a statement today on Business Wire. The company was expected to earn 96 cents a share, the average of 17 analyst estimates compiled by Bloomberg. Revenue rose 20 percent to $5.64 billion.

Schlumberger, based in Houston and Paris, is profiting from greater oil and gas exploration, particularly in deepwater fields offshore, prompted by high prices and efforts to extend the lives of aging fields.

``The company's been pretty steady in saying they see demand carrying on to the end of the decade, and likely beyond,'' Stephen Leeb, president of Leeb Capital Management, said in an interview earlier this week. ``The only weakness in the oil patch I see is in the U.S. on natural-gas prices.''

Oil futures traded on the New York Mercantile Exchange have more than doubled over the past four years, touching an 11-month high of $76.10 a barrel today. Oil touched a record $78.40 a year ago.

Natural-gas futures, which touched a record $15.78 per million British thermal units in December 2005, have retreated to about $6.75 after mild winter weather left an abundance of the heating and power-plant fuel in storage in the U.S.

`Huge Separation'

``There's been a huge separation between natural gas and oil,'' said Leeb, whose funds held about $5 million in Schlumberger stock at the end of the first quarter, according to regulatory filings. ``Natural-gas prices are down considerably from their highs, whereas oil prices in some cases are at record highs.''

There were 2,996 rigs drilling for oil and gas worldwide in June, on average, a gain of 16 percent over two years, according to Baker Hughes Inc., the third-largest oilfield contractor. The rig count of 3,352 in February was the highest since 1986.

The increased drilling placed premiums on Schlumberger's well-completion services, wireline testing and hydraulic fracturing. Pretax margins for oilfield services widened to 30.4 percent from 27.2 percent, the company said.

The statement was issued before the start of regular trading on U.S. stock markets. Shares of Schlumberger rose $2.25, or 2.5 percent, to $93.45 yesterday in New York Stock Exchange composite trading.

Overseas Operations

Schlumberger is doing more business in the Middle East and Latin America as state-owned oil companies increase exploration.

``They have a Latin American business that is having a fabulous second quarter, and their Middle East business is having a fabulous second quarter,'' James Wicklund, chief investment officer of Spinnerhawk Capital Management in Dallas, said in a July 16 interview.

Schlumberger's second-quarter profit in North America was limited by a slowdown in drilling. There was average of 2,006 rigs operating in the region at the end of June, down 6.2 percent from a year earlier.

Earlier this month, Baker Hughes said its second-quarter profit was less than analysts expected because of a slowdown in drilling in Canada and higher tax rates and costs. The Houston- based company is scheduled to report earnings on July 27.

Schlumberger was expected to fare better than its competitors because of its smaller reliance on North America.

To contact the reporter on this story: Amy Strahan in Houston at astrahan@bloomberg.net.

Last Updated: July 20, 2007 06:09 EDT