Oilfield services provider Schlumberger Ltd. (SLB) reported Friday a 48.7% fall in third-quarter profit, hurt by sharp decline in revenues from Oilfield Services and WesternGeco segments. Quarterly earnings per share, however, topped market projections, while top line missed Street view. Looking ahead, the Houston, Texas-based company said that its outlook for the remainder of 2009 "assumes a continued modest recovery in North American gas drilling", but, without any significant improvement in service pricing.
Net income for the quarter plunged to $789 million from prior year's $1.539 billion. Net income attributable to the company fell 48% to $787 million or $0.65 per share from $1.526 billion or $1.25 per share in the same quarter last year.
On average, 26 analysts polled by Thomson Reuters expected the company to report earnings of $0.63 per share for the quarter. Analysts' estimates typically exclude special items.
Sequentially, third-quarter earnings fell 4% from adjusted earnings of $820 million or $0.68 per share recorded in the second quarter. The company's second-quarter net income was $615 million, and net income attributable to Schlumberger was $613 million or $0.51 per share.
Revenues for the third quarter fell to $5.43 billion from $7.26 billion in the prior year quarter, and missed sixteen analysts' consensus revenue estimate of $5.48 billion. On a sequential basis, third-quarter revenues declined from $5.53 billion.
Oilfield Services revenue declined 22% to $4.95 billion from $6.36 billion a year ago. The segmental pretax operating income plunged 39% to $1.04 billion from prior year's $1.70 billion. North American oilfield revenue declined 45% year-over-year to $823 million. According to the company, in North America, "the positive impact of a recovery in rig count in Canada following the spring break-up was offset primarily by a slowdown in the US Gulf of Mexico GeoMarket due to operator caution during the hurricane season and by continuing pricing erosion in the US Land GeoMarket."
Latin American oilfield revenue dropped 6% to $1.07 billion, and revenues from Europe/CIS/Africa region fell 18% to $1.78 billion. In Middle East & Asia, oilfield revenues totaled $1.23 billion, down 17% from the same period last year.
WesternGeco revenue was $463 million, down 48% from prior year's $892 million. Pretax segment operating income fell 83% to $61 million from $355 million a year ago.
Commenting on the results, Schlumberger Chairman and Chief Executive Officer Andrew Gould stated, "Oilfield Services revenue was flat with the second quarter as increases in both North and South America offset a further decline in the Middle East and Asia. As a result of this, coupled with the implementation of cost-cutting programs earlier in the year, overall margins slightly increased."
Among others in the field, Halliburton Co. (HAL) last week posted a sharp decline in third-quarter profit, largely hurt by continued pricing pressures in North America. The Houston, Texas-based oilfield services provider's net income attributable to company was $262 million or $0.29 per share, compared to $672 million or $0.74 per share in the year-ago quarter. Net income, excluding items, totaled $281 million or $0.31 per share. Quarterly revenue dropped 3% to $3.59 billion from the previous year's revenue of $4.85 billion.
Another Houston, Texas-based peer Baker Hughes Inc. (BHI), the world's third-largest oilfield services company behind Schlumberger and Halliburton, is due to release its third-quarter results on November 4, with analysts projecting earnings of $0.35 per share on revenues of $2.26 billion.
For the nine months of fiscal 2009, Schlumberger's net income attributable to Schlumberger plunged to $2.34 billion or $1.93 per share from $4.29 billion or $3.50 per share a year ago. Revenue was $16.96 billion, down from prior year's $20.30 billion. Oilfield Services revenue for the period fell 15% to $15.35 billion, and revenues from WesternGeco declined 30% from last year to $1.57 billion.
Looking ahead, Schlumberger said that its outlook for the remainder of 2009 "assumes a continued modest recovery in North American gas drilling but no significant improvement in service pricing. Overseas, while rig activity is stabilizing, seasonal factors and pricing concessions made in the first half year that are still being implemented leave some risk of further small revenue declines. At WesternGeco, improvement will depend on the level of fourth-quarter multiclient sales."
The company expects that demand for oil and gas will increase somewhat over the coming months, despite ongoing uncertainties, such as the transition from current government stimuli to industrial and consumer demand and the extent to which the recovery will be limited by high unemployment.
The company also said it sees continuing stabilization of activity around the world, however, this will not be uniform across either geographies or for services by commodity type.
Schlumberger previously had stated that the shape of the economic recovery beyond 2009 and the subsequent recovery in oil and gas demand remained the determining factors for future activity increases. Since then, indications of inventory rebuilding across many industries together with help from government stimuli have helped to strengthen demand for both oil and gas, the company noted.
Further, Schlumberger said that world gas markets are oversupplied and will remain so for some time absent any strong recovery in industrial demand, and new LNG capacity coming on stream, as well as ample storage and pent-up supply in North America, will serve to keep prices and activity low. In North America, the company said it believes that current slight recovery in drilling is fragile and not likely to significantly improve service activity and pricing until late 2010.
"The worst, provided the economy continues to show signs of recovery, is behind us," the company said in a statement.
SLB closed Thursday's regular trading session at $68.60, up $0.59, on a volume of 10.8 million shares. In the past 52 weeks, shares have been trading in a broad range of $35.05 - $71.10.
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