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Schlumberger Profit Rises on Deep-Water Oil Search

Schlumberger Profit Rises as Search for Deep-Water Oil Expands
Schlumberger Ltd., the world’s largest oilfield-services provider, said third-quarter profit rose. Photographer: Mike Fuentes/Bloomberg

Schlumberger Ltd., the world’s largest oilfield-services provider, said third-quarter profit rose 9.5 percent as customers continued to expand their hunt for oil in deep-water locations worldwide.

Net income increased to $1.42 billion, or $1.07 a share, from $1.3 billion, or 96 cents, a year earlier, Houston- and Paris-based Schlumberger said today in a statement. Excluding acquisition-related costs, the company beat by 2 cents the $1.06 average of 32 analysts’ estimates compiled by Bloomberg. Sales climbed 11 percent to $10.6 billion.

Discoveries off the coasts of Brazil and West Africa have helped boost the number of drilling rigs and the demand for services including well completion. The average number of active rigs outside the U.S. and Canada rose 6.8 percent to 1,254 compared with a year earlier, according to Baker Hughes Inc. Oil prices increased 3 percent to average $92.20 a barrel in New York during the quarter.

“Schlumberger did well,” James Wicklund, an analyst for Credit Suisse Group AG in Dallas, who rates the shares a hold and owns none, said in a telephone interview. “It was the Middle East where they beat. That’s always been a big stronghold for Schlumberger.”

Revenue in the Middle East and Asia climbed 7 percent from the second quarter to $2.4 billion while the operating profit margin rose to 24.2 percent, the highest among Schlumberger’s four geographic units. The regional profit was 4 cents per share better than Wicklund’s estimate, he said.

Ramping Up

The company reported “solid” workover, development and exploration activity in Saudi Arabia and Bahrain, according to the statement.

“When the Saudis are ramping things up, these guys perform pretty well,” said Jeff Spittel, an analyst at Global Hunter Securities in Houston. He rates the shares at accumulate, which means investors should buy the stock, and owns none.

Schlumberger generates about two-thirds of sales outside of North America, the highest ratio among the largest service providers, including Halliburton Co. and Baker Hughes.

“Internationally we have seen a slow steady grind higher,” Stephen Gengaro, an analyst at Sterne Agee & Leach Inc. in New York who rates the shares a buy and doesn’t own them, said in a telephone interview before the results were announced. Deep water exploration is a “multi-year” growth story, he said.

The company said it still expects its international business to climb more than 10 percent this year, according to the statement.

North America

“In North America on the other hand, the strength in Gulf of Mexico activity will continue to be challenged by weakness in the land hydraulic fracturing market and early signs of softening in the land coiled-tubing business,” Chief Executive Officer Paal Kibsgaard said in the statement.

“They weren’t wildly optimistic,” Wicklund said. “They sounded pretty realistic.”

The earnings statement was released before the start of regular trading on U.S. markets. Schlumberger, which has 36 buy, one sell and four hold recommendations from analysts, fell 1.1 percent to $74 at the close in New York.

Download: Earnings

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