Schlumberger Net Income Falls After Oil Prices Tumble

By David Wethe

Oct. 23 (Bloomberg) -- Schlumberger Ltd., the world’s largest oilfield-services provider, said third-quarter profit fell 48 percent as a drop in energy prices forced producers to slash spending.

Net income fell to $787 million, or 65 cents a share, from $1.53 billion, or $1.25, a year earlier, Schlumberger said today in a statement. The company, based in Houston and Paris, was expected to earn 61 cents a share, the average of nine analyst estimates compiled by Bloomberg. Sales dropped 25 percent to $5.43 billion.

Oil futures tumbled 42 percent from a year earlier to average less than $70 a barrel in the third quarter as the recession cut demand for petroleum-based fuels. Natural-gas futures traded as low as $2.41 per million British thermal units in September, down from a 2008 high of $13.69.

“I think this is a somewhat boring result, but it is a clean number,” said Mark Brown, an analyst at Pritchard Capital Partners LLC in New York who rates the shares “buy” and owns none. “The earnings show a steady progression of the recovery is occurring, but their reluctance to confirm a recovery with any real conviction going forward is not likely to generate a great deal of excitement following this report.”

Revenue at Schlumberger’s largest segment, the oilfield- services unit, fell 22 percent to $4.95 billion, while sales at the WesternGeco seismic unit dropped 48 percent to $463 million.

Sales in North America, the company’s smallest regional unit by revenue, fell 45 percent to $823 million.

Drilling Recovery ‘Fragile’

The current “slight recovery” in North American drilling is “fragile” and not likely to see improved activity and pricing until late 2010, Chief Executive Officer Andrew Gould said in the statement.

World gas markets are oversupplied and will remain so for “some time” while current “robust” oil prices paired with lowered costs for producers may lead to modest increases in activity, he said.

“The worst, provided the economy continues to show signs of recovery, is behind us,” Gould said.

Oil and gas producers around the world will slash capital budgets by 15 percent this year to $387 billion, according to a June 19 estimate by Barclays Capital in New York.

Gould said Sept. 8 service-contract renegotiations are over and the effect on financials will be seen in the second half of this year.

The earnings statement was released before the opening of regular trading on U.S. markets. Schlumberger rose 59 cents to $68.60 yesterday in New York Stock Exchange composite trading. The shares, which have 16 buy ratings from analysts, 11 holds and 1 sell, climbed 10 percent during the third quarter.

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