UPDATE 1-Schlumberger says North America weaker than expected in Q1
(Adds more from speech, paragraphs 5-10)
March 18 (Reuters) - Schlumberger Ltd, the world's largest oilfield services company, warned on Monday that North American activity was coming in lower than expected in the first quarter as fewer rigs were going back to work than it predicted.
Shares of Schlumberger fell 3.2 percent to $76.88 in early trading on the New York Stock Exchange.
In a copy of a speech delivered by Chief Executive Paal Kibsgaard on Monday, Schlumberger said asset utilization had recovered from a holiday slowdown and the lower cost of a key hydraulic fracturing ingredient, guar, was providing some relief. But pricing remains the fundamental issue, he added.
"We continue to see negative pricing pressure in many product lines in the first quarter, with active participation from our principal competitors, reinforcing the somewhat unclear outlook for the North America land market at this stage," Kibsgaard said in the speech to the Howard Weil energy conference in New Orleans.
The North American natural gas glut has forced many drillers to shut down rigs until prices recover. Kibsgaard raised a few eyebrows among analysts with a prediction in January that between 100 and 150 rigs could go back to work in the first quarter - a quicker recovery than many others had anticipated.
Looking offshore, he said on Monday that Gulf of Mexico activity had been temporarily affected by the replacement of subsea connector bolts on some rigs there. Last month, U.S. regulators told offshore rig contractors to inspect the bolts, made by General Electric Co, after a leak.
Schlumberger maintained its goal of double-digit earnings growth for 2013, assuming that North America land activity and pricing levels come in line with expectations and that it reaches a solution in Venezuela, where it saw a significant slowdown in the rates of payments by customers last quarter.
Among international markets, Kibsgaard highlighted Saudi Arabia, Iraq, China and Africa. The Saudi rig count would now reach 170 by the end of this year, he said, raising the estimate by 10 rigs from what Schlumberger expected in January.
In Iraq, where the oilfield services industry has been investing for years in anticipation of growth, Kibsgaard expected 2013 revenue of $600 million and good profitability.
As for all the unconventional resources unlocked by hydraulic fracturing, he said North America would remain the center of activity, especially in oil, and the short-term focus outside the region would be on pilot projects. "Activity and production will likely start to become more meaningful in the second half of this decade," he said of global unconventionals.
(Reporting by Braden Reddall in San Francisco; Editing by Gerald E. McCormick and Maureen Bavdek)