A Review of the Nigerian Energy Industry

Drilling outside N. America drives Schlumberger profit

Mobile-offshore-drilling-unit20 January 2014 – Schlumberger Ltd, the world’s largest oilfield services company, reported a better-than-expected 22 percent jump in fourth-quarter profit as robust international drilling activity made up for weakness in North America.

Prices for oilfield services remain weak in the United States and Canada, where land drilling has slowed due to depressed natural gas prices. Most of Schlumberger’s gains in North America came from the U.S. Gulf of Mexico.

“In the United States, we see no change in fundamentals, with any meaningful recovery in dry gas drilling activity some way out in the future,” Chief Executive Paal Kibsgaard said.

Schlumberger has the lowest exposure to North America among the big four oilfield service providers, which also include Halliburton Co, Baker Hughes Inc and Weatherford International Ltd.

International markets brought in about two-thirds of Schlumberger’s 2013 revenue of $45.27 billion.

The company is positive about 2014 as exploration and production spending is expected to increase in international markets and the U.S. Gulf of Mexico, Kibsgaard said.

Oil and gas companies are expected to spend about $723 billion on exploration and production this year, an increase of 6.1 percent from 2013, according to a Barclays Bank report released last month.

Schlumberger, which topped analysts’ profit estimates for the ninth straight quarter, said a temporary shutdown of its operations in southern Iraq in November, following a protest, slightly hurt fourth-quarter results.

Seasonal slowdowns in North America, the North Sea, Russia and China also weighed on results but were more than offset by growth in international markets, particularly the Middle East and Asia.

Schlumberger suspended activity in Iraq after dozens of Shi’ite Muslim workers and tribesmen stormed the Schlumberger camp in North Rumaila and wrecked offices, accusing a foreign security adviser of insulting their religion.

Baker Hughes earlier this month estimated a smaller-than-expected quarterly profit, citing the suspension of its operations in Iraq. Baker Hughes and Halliburton are scheduled to report their fourth-quarter results on Jan. 21.

Schlumberger’s net income rose to $1.66 billion, or $1.26 per share, in the fourth quarter ended Dec.31, from $1.36 billion, or $1.02 per share, a year earlier.

Excluding items, profit from continuing operations was $1.35 per share. Revenue rose about 7 percent to $11.91 billion.

Analysts on average had expected earnings of $1.32 per share on revenue of $12.01 billion, according to Thomson Reuters I/B/E/S. Schlumberger shares were up about 1 percent at $89.69 before the opening bell on Friday.

Schlumberger shares have risen 21 percent in the past year, compared with a 17 percent rise in the Philadelphia oil service index.

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