Schlumberger Earnings Advance as Customers Boost Spending

Schlumberger Ltd., the largest oilfield-services provider, said fourth-quarter profit rose 22 percent as customers spent more in the search for harder-to-reach deposits around the globe.

Net income climbed to $1.66 billion, or $1.26 a share, from $1.36 billion, or $1.02, a year earlier, Houston- and Paris-based Schlumberger said today in a statement. Excluding one-time items, profit exceeded the $1.32 average of 33 analysts’ estimates compiled by Bloomberg. Sales climbed 7.4 percent to $11.9 billion.

The Middle East and Asia led the company’s international growth in the quarter, with sales climbing 18 percent, and the operating profit margin in the region growing to 26 percent from 22 percent a year earlier. The company generates about two-thirds of sales outside of North America, the highest ratio among the largest service providers, including Halliburton Co. and Baker Hughes Inc.

“They delivered particularly well on the international side, despite some disruptions,” Scott Gruber, an analyst at Sanford C. Bernstein & Co. in New York, who rates the shares the equivalent of a buy and owns none, said today in a phone interview. “It was a quality set of results.”

The company raised its quarterly dividend by 28 percent to 40 cents a share, according to a statement yesterday. The company today forecast double-digit growth in this year’s per-share earnings. Analysts estimated a 22 percent increase, according to the average of 36 estimates compiled by Bloomberg.

‘Continuing Strength’

“With exploration and production spending expected to grow further in 2014, led by international activity and continuing strength in deepwater U.S. Gulf of Mexico, we remain positive about the year ahead,” Chief Executive Officer Paal Kibsgaard said in the statement.

The biggest sequential growth in earnings will come in the second and third quarters, while the first quarter will see a seasonal decline similar to the average drop of about 10 percent in the past few years, Kibsgaard said.

The company said a temporary shutdown of operations in southern Iraq, as well as seasonal slowdowns in North America, the North Sea, Russia and China affected overall results.

Russia, the Middle East and China are expected to be key international growth areas this year, the company has said in the past. Schlumberger expects to have “another challenging year” in Brazil in 2014 with overall rig activity growth remaining little changed from a year earlier, Kibsgaard said. That view is lower than what the company expected 12 to 18 months ago, he said.

‘Topline Growth’

Schlumberger says it uses specialized oilfield technologies to differentiate itself from peers and win a premium for work done outside the U.S. and Canada. Its services include completing wells with hydraulic fracturing, which blasts water, sand and chemicals underground to free trapped hydrocarbons.

“Expectations were high, but I think this quarter they delivered,” Byron Pope, an analyst at Tudor, Pickering, Holt & Co. in Houston, said today by phone. “You essentially had topline growth in all four of their geographic reporting regions.”

The average number of rigs active around the world rose 0.6 percent to 3,456 in the fourth quarter from a year earlier, according to Baker Hughes.

Schlumberger, which has 33 buy, five hold and one sell recommendation from analysts, rose 1.5 percent to $89.91 at 10:53 a.m. in New York.

Before it's here, it's on the Bloomberg Terminal.