Schlumberger Net Boosted as Oil Explorers Seek TechnologyDavid Wethe
Rising demand for more advanced oilfield technology to tap hard-to-reach crude around the world spurred a record first-quarter profit for Schlumberger Ltd.
The world’s largest oilfield services provider today announced plans to complete a $10 billion share buyback program earlier than expected. The latest results were led by the Middle East and Asia, offsetting severe winter weather which hampered operations elsewhere.
“International is really where I see the opportunity,” said Rob Desai, an analyst at Edward Jones in St. Louis, who rates the shares at buy and owns none. “Schlumberger just has those relationships and the technology to really continue to grow the international slate.”
Chief Executive Officer Paal Kibsgaard is pushing new patents and technology to help companies increase production. Customers will increase well-related spending by more than 6 percent this year, he said in a statement today, expressing caution over the crisis in Ukraine and warning of slower growth in Brazil.
Net income climbed to $1.59 billion, or $1.21 a share in the first three months of the year, from $1.26 billion, or 94 cents, a year earlier, Houston- and Paris-based Schlumberger said in the statement. That matched the $1.21 average of 17 analysts’ estimates compiled by Bloomberg. Sales climbed 6.3 percent to $11.2 billion.
Schlumberger is targeting second-quarter earnings at the same level as the fourth quarter of 2013, when it reported per-share profit of $1.35 excluding certain items. The company is expected to earn $1.36 per share on that basis, according to the average of 32 analysts’ estimates compiled by Bloomberg.
Its services include mapping where pockets of oil sit under the earth’s surface and completing wells with hydraulic fracturing, which blasts water, sand and chemicals underground to free trapped hydrocarbons.
“In terms of pricing, we saw little change in general trends, but new technology at premium pricing continued to penetrate the market and contributed to operating margin results,” Kibsgaard said. Management “remain positive on the year to come.”
North American revenue rose 12 percent to $3.68 billion and international sales climbed 5 percent, led by the Middle East and Asia. That was driven mainly by Saudi Arabia and the United Arab Emirates, and drilling and technology in Southeast Asia and deepwater Australia.
Latin America revenue declined 8 percent to $1.76 billion, mainly due to declines in Brazil and reduced rigs in Mexico. Increased work at the Shushufindi project in Ecuador and in the Vaca Muerta shale in Argentina helped to counter the weakness.
Schlumberger plans to complete its share buyback program in two and a half years, as opposed to the 5-year timeframe announced in July, Chief Financial Officer Simon Ayat said on a conference call. The company has so far spent $2.6 billion on stock repurchases.
The company’s portfolio of U.S. patents has more than doubled in the past nine years, while investment in research and engineering climbed 10 percent last year to $1.17 billion from $1.06 billion in 2011. New technologies include HiWay, which creates pathways in the fracture networks, and a more advanced diamond-cutter drill bit known as the Stinger.
The shares, which have climbed 41 percent in the past year, fell 1 percent to $99.91 in New York. That compared with a 3.1 percent gain for Baker Hughes Inc., the world’s third-largest oilfield servicer, which posted earnings today that beat analysts’ estimates.
The average number of rigs active around the world rose 6.1 percent to 3,644 in the quarter from 3,436 a year earlier, according to Baker Hughes.