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Schlumberger 2Q tumbles 57 pct as drilling slows
2009-07-24
HOUSTON - Schlumberger Ltd. said Friday its second-quarter earnings tumbled 57 percent as oil and natural gas companies cut back on exploration and drilling, particularly in North America. Still, the results topped Wall Street expectations. The world's largest oilfield services company said net income for the April-June period fell to $613 million, or 51 cents per share, from $1.42 billion, or $1.16 per share, a year earlier. One-time items aside, Schlumberger said income from continuing operations amounted to 68 cents a share -- 5 cents better than the consensus estimate of Wall Street analysts polled by Thomson Reuters. Revenue fell 18 percent to $5.53 billion from $6.75 billion in the year-ago quarter. But the most-recent result beat the consensus forecast of $5.46 billion. Company shares jumped more than 4 percent, or $2.47, to $58.41 in premarket trading. Schlumberger in January said it had slashed 5,000 jobs worldwide and on Friday, the company reported one-time charges of 17 cents a share related to severance payments retirement benefits. Lower oil and gas prices have prompted energy companies around the world to scale back oilfield activity, which means less work for Schlumberger and smaller rivals like Halliburton Co. Service companies help producers with drilling, seismic surveys, reservoir management and other oilfield tasks. Like Halliburton earlier this week, Schlumberger said a significant decline in natural-gas drilling in North America weighed heavily on second-quarter results. In a statement, Schlumberger chairman and CEO Andrew Gould said the rate of declining revenue slowed in the second quarter from the start of the year as improving business in other parts of the world somewhat offset the drag from North America. Activity in Russia was noticeably improved, Gould said. One of the biggest obstacles has been natural gas prices, which have tumbled from double-digit levels a year ago to well below $4 per 1,000 cubic feet of late. Gould said natural-gas drilling in the U.S. and Canada reached a five-year low in recent months because of weak demand and large inventories. He said he doesn't expect a significant rebound in drilling this year. The number of rigs at work in the U.S. oil patch is off roughly 55 percent from last summer. "Our outlook for the remainder of 2009 assumes some stability but no major increase in the North America natural gas rig count and, as a result, ... pricing will remain depressed," Gould said. Overseas, Schlumberger said declining activity should be limited as the year progresses but pricing concessions made in the first half of the year will affect second-half revenue. In addition, "the current volatility in the oil price makes it unlikely that our customers will sanction any major increases in expenditures," Gould said. After hitting an all-time high near $150 a barrel a year ago this month, the price of crude tumbled all the way down to below $33 in January. It's now back up to around $67 a barrel. Schlumberger, whose principal offices are in Houston, Paris and The Hague, said revenue at its oilfield services arm fell 18 percent year over year to $5 billion, but sales were off 43 percent in North America. The company's seismic arm, WesternGeco, posted second-quarter revenue of $559 million, down 17 percent from a year ago. For the first six months of 2009, Schlumberger said its net income was $1.6 billion, or $1.28 a share, down from $2.8 billion, or $2.25 a share, for the same period a year ago. Sales fell to $11.5 billion from $13 billion. Earlier this week, Halliburton signaled the difficulty service companies are facing, reporting its second-quarter profit fell 48 percent from a year earlier. Halliburton pegged the decline largely to a falloff in North American natural-gas production and, like Gould, offered little hope for an uptick in drilling before year's end. Several of the major oil producers, including Exxon Mobil Corp. and ConocoPhillips, are scheduled to report second-quarter results next week.
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