Schlumberger Fourth-Quarter Profit Rises as Drilling Booms

Schlumberger Ltd. (SLB), the world’s largest oilfield-services provider, said fourth-quarter profit rose 36 percent as higher crude prices pushed oil companies to boost exploration and production spending around the world.

Net income rose to $1.41 billion, or $1.05 a share, from $1.04 billion, or 76 cents, a year earlier, Houston- and Paris- based Schlumberger said today in a statement. Excluding charges related to a write-off of Libya assets, the company earned $1.11 a share, beating by 2 cents the average of 32 analyst estimates compiled by Bloomberg. Sales climbed 21 percent to $11 billion.

Oil prices advanced 10 percent to average $94.06 a barrel on the New York Mercantile Exchange in the quarter, up from $85.24 a year earlier. The average number of active oil and natural-gas rigs around the world rose 15 percent in the final three months of the year to 3,676, Baker Hughes Inc. data show.

Revenue in its North America region, which excludes Mexico, climbed 6 percent to $3.52 billion while the operating profit margin was $947 million, or 27 percent.

“North America was really the good upside surprise,” John Keller, an analyst at Stephens Inc. in Houston, who rates the shares at “overweight” and owns none, said in a telephone interview. “The return of deepwater rigs in the Gulf certainly added a tailwind during the quarter.” Keller had estimated revenue of $3.45 billion and a 25 percent margin.

Photographer: Mike Fuentes/Bloomberg

Oil prices climbed 10 percent to average $94.06 a barrel on the New York Mercantile Exchange in the quarter, up from $85.24 a year ago. Close

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Photographer: Mike Fuentes/Bloomberg

Oil prices climbed 10 percent to average $94.06 a barrel on the New York Mercantile Exchange in the quarter, up from $85.24 a year ago.

Schlumberger reported its best North American margin performance in more than four years, according to data compiled by Bloomberg.

2012 Outlook

“Uncertainty remains over the outlook for 2012 due to the continuing sovereign debt crisis in Europe which places downward pressure on GDP and oil demand forecasts,” Chief Executive Officer Paal Kibsgaard said in the statement. “Against this backdrop, we are planning for growth in 2012, while building the required flexibility into our resource plans.”

Kibsgaard’s comments were cautious, Bill Herbert, an analyst at Simmons & Co. in Houston, wrote today in a note to clients.

“Management made a reference to ‘building the required flexibility into’ its ‘resource plans’ in the event of industry dislocations,” he wrote. “This is code for throttling back on spending, at a minimum, if warranted.”

The company is expected to earn net income of $1.10 per share in the first quarter, according to the average of 17 analyst estimates compiled by Bloomberg. Kibsgaard told investors on a conference call that consensus estimates are on the “high side.”

‘Added Uncertainty’

“There is some added uncertainty going into Q1 now in terms of the impact of the accelerating drop in North American shale-gas activity,” Kibsgaard said on the call. “Generally, I would say the current consensus is somewhat on the optimistic side.”

Explorers and producers around the world are expected to boost annual spending by 9 percent this year to a record $595 billion, James Crandell and Omar Nokta, managing directors at investment bank Dahlman Rose & Co., wrote in a Jan. 3 note.

Schlumberger helps companies drill for oil and gas, including using hydraulic fracturing to free the fuel from shale formations.

Gulf of Mexico

The average number of rigs active in the Gulf of Mexico climbed 68 percent to 37 in the fourth quarter, compared with 22 a year earlier, according to Baker Hughes.

In the U.S. onshore market, the largest region in the world for hydraulic fracturing work, Stephens analysts project an 8 percent growth in the number of drilling rigs working this year compared with 2011.

Schlumberger rose 1.3 percent to close at $73.80 in New York. The shares, which have 31 buy ratings from analysts, five holds and one sell, rose 14 percent during the quarter.

To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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